Canadian primary market at a halt; secondary flows light; OPTI Canada's bonds trade higher

By Cristal Cody

Prospect News, Dec. 21 - The Canadian corporate bond market was mostly quiet on a lack of new deals, though secondary flows remained active on Tuesday.

"We're not expecting any new issuances, but there's still secondary flows," a source said. "There are investors making portfolio adjustments. Volumes are definitely lighter than a typical normal week, and I think next week will be even quieter."

In trading, OPTI Canada's bonds firmed on end-of-year positioning, a trader said.

Canadian government bonds rallied on economic data released early in the day, including lower retail sales figures and a Conference Board of Canada report that said consumer confidence index fell in December.

The Canadian 10-year bond yield fell to 3.144% from 3.16%. The two-year note yield fell to 1.633% from 1.64%.

The Bank of Canada's core inflation index increased 1.4% annually in November, following a 1.8% rise in October. In other data, Statistics Canada said the November consumer price index rose an annual rate of 2%, down from a 2.4% rise in October.

Retail sales edged up 0.8% to C$36.6 billion in October, reflecting higher gas prices. Excluding sales at gasoline stations, retail sales fell 0.1%, Statistics Canada said.

U.S. Treasuries ended the day mostly flat following two more purchases by the Federal Reserve as part of the $600 billion asset buyback program to stimulate the economy.

The yield on the 10-year note fell 3 basis points to 3.3%. The two-year note rose 1 bp to 0.61%.

The Federal Reserve purchased $1.619 billion of Treasury Inflation Protected Securities due 2012 through 2040 and $7.79 billion of notes due 2016 through 2017.

OPTI bonds 'pop'

OPTI Canada bonds meantime "popped up a few points," a trader said.

He saw the 7 7/8% notes due 2014 open around "67 and change" before trading up to 693/4. That compared to Monday's market of 66 bid, 67 offered.

The trader said the 8¼% notes due 2014 were "about the same" as the 7 7/8% notes at 693/4.

Another trader pegged the 8¼% notes around 69½ and the 7 7/8% notes around 693/4.

"They had touched 58 at one point," he said of the latter issue. "So they have really had some recovery."

The gains in the Calgary, Alta.-based oil sands producer's debt were attributed to end-of-the-year positioning.

Stephanie N. Rotondo contributed to this review

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