Canadian corporates quiet; high-yield secondary firm; Ontario sells C$500 million add on

By Rebecca Melvin

New York, March 7 - Canada's corporate bond market was quiet on Wednesday with no bonds pricing, sources said.

Action in the high-yield secondary market was described as firm with decent action in a number of names including Yellow Media Inc., which has seven straight bond issues, all of which were trading in the 40s, a Toronto-based high yield specialist said.

"Yellow Media has seven different bonds and U.S. guys are getting involved in the name. It has been trading in the 40 to 50 range for the last four months," the strategist said.

There were no new issues, and the market continues to be firm, with no new supply and dealers light on inventory; nevertheless, secondary volume has been decent, the specialist said of the high-yield market.

While the U.S. high-yield new issuance market has experienced some weakness of late, the Canadian high-yield market has not had any new issuance and has not tested that trend, he said.

Market players were looking ahead to the Bank of Canada rate announcement expected early Thursday. The Canadian central bank like its U.S. counterpart sets policy eight times a year.

"There's no debate that they are going to keep rates stable as they have been for a year now; the question is if they are more comfortable with the economic picture," a specialist in provincial and government debt said regarding the rate announcement.

Wednesday's bond market was driven by the counterpoint of stronger equities more than anything else, the specialist said. Higher equities slightly depressed the bonds. But given the inputs expected Thursday, including the central bank's economic reading and more news regarding Greece's sovereign debt swap, Wednesday's market "could be the calm before the storm," the specialist said.

There was a better mood in equity markets, reversing action the day before," the specialist said.

In the provincial market, the Province of Ontario came in with a reopening of its 3.15% 10-year bonds due June 2, 2022 for C$500 million to yield 2.981%.

The bonds priced at a spread of 92.5 basis points over the Government of Canada benchmark.

Canadian government bonds were slightly softer. The two-year note yield rose 4 bps to 1.12%. Canada's 10-year note yield lifted 3 bps to 1.96%.

"There was a little bit of backing up, but not too much," the provincial and government specialist said.

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