Laurentian Bank sells C$250 million 3.7% 10-year notes; appetite strong for new deals

By Cristal Cody

Prospect News, Oct. 25 - In the Canadian securities market, Monday started off with an upsized sale from Laurentian Bank of Canada, which priced C$250 million 10-year subordinated medium-term notes, series 2010-1, on Monday, sources said.

The deal was upsized from C$200 million. The 3.7% notes priced at 99.733 to yield 3.759%, or a spread of 186.6 basis points over the Canadian government benchmark. The notes priced at the low end of price talk, according to a source.

The bonds were sold to good demand.

"The spread is still very favorable," said Paul Gardner, a partner and portfolio manager at Avenue Investment Management in Toronto. "The window's certainly open for financing in Canada. It's been like that for the last six months, and Laurentian being one of the smaller banks still has access to the markets."

The notes are callable after five years at par.

Laurentian Bank Securities, Inc. was the lead bookrunner of the deal.

Proceeds will be used for general banking purposes.

The Quebec-based bank offers commercial and consumer banking services through more than 150 branches in Canada.

Year-end supply eyed

While October had been mostly a quiet month for new corporate deals, the end of the year is gearing up for more issuance, particularly financial offerings, Gardner said.

"This is the time of the year everyone gets into the action," he said. "There's a very big appetite - people are very negative on the U.S. dollar. Pension funds are starting to allocate more capital to Canada, whether it's the stock market or the bond market."

The Canadian dollar closed Monday at C$1.0203, compared to 98.01 U.S. cents, up from C$1.0269 compared to 97.38 U.S. cents on Friday.

Canadian government bonds ended the day weaker, sticking in line with U.S. Treasuries as investors expect the Federal Reserve to announce bond buybacks at the Nov. 2-3 meeting.

The Canadian 10-year note ended unchanged at 2.74%. The two-year also was flat at 1.39%.

"It's been rallying all day," said Kam Bath, a fixed Income Strategist with RBC Dominion Securities Inc. in Toronto. "Bonds gave back a little bit of the rally after firm U.S. numbers but stayed strong across the curve by the end of the day. Canada's in line with the U.S. now, though it's lagging the rally at the long end."

U.S. Treasuries were mixed late in the day as yields turned positive following a reopening of $10 billion in five-year Treasury Inflation Protected Securities, or TIPS. The Treasury Department sold the TIPS at a yield of negative 0.55%.

The yield on the 10-year benchmark note was unchanged at 2.56%. The yield on the two-year note ended the day flat at 0.36%.

The 30-year bond yield fell 2 bps to 3.91%.

Coming up on Tuesday, the Treasury Department will auction $35 billion in two-year notes, with sales of $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday.

OPTI Canada rises

Elsewhere in Canadian corporate debt, a trader saw OPTI Canada Inc.'s 7.875% notes due 2014 rise to 72 bid, 73 offered, up from levels around 70 bid, 71 offered on Friday, when the bonds had retreated.

No news was seen out on the Canadian energy company, but the trader suggested that "maybe something was going on" with another company in the same oilsands sector that would lift OPTI's bonds as well as those of other operators.

"A rising tide, you know," lifts all boats, he said.

Another market source pegged the bonds nearly 2 points better, at just over 72 bid.

Catalyst Paper steady

Also on Monday, a trader saw Richmond, B.C.-based paper manufacturer Catalyst Paper Corp.'s 11% senior secured notes due 2016 at 88 bid, 90 offered, which he called "pretty much unchanged," while its 7 3/8% notes due 2014 were steady at 55 bid, 56 offered.

Paul Deckelman contributed to this story

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