OPTI Canada bonds give up gains; corporate bond primary shuts down; Government bonds fall

By Cristal Cody

Prospect News, Dec. 22 - In Canadian bond trading, OPTI Canada's debt ended off of Tuesday's highs, sources said Wednesday.

The high-grade and high-yield corporate bond markets in Canada are basically closed for the final two weeks of the year, according to sources.

"It's done," one source said. "Quebecor Media's deal done a week ago - that will be the last one for the year."

Quebecor Media Inc. sold an upsized C$325 million of 7.375% senior unsecured notes (B1/B+/DBRS: BB/) due Jan. 15, 2021 on Dec. 15 at a spread of 395.7 basis points over the Canadian government benchmark.

Montreal-based Quebecor Media is a subsidiary of Quebecor Inc., one of Canada's largest communications and media companies.

The company's deal was one of 14 high-yield bonds sold in Canada over the past year.

OPTI gives back

OPTI Canada bonds "did give back the point and change from yesterday," a trader said.

He added that the credit was the "most active of everything" and placed both issues - the 7 7/8% and 8¼% notes due 2014 - at 68 bid, 69 offered.

He noted that the 7 7/8% notes were trending toward the lower end and the 8¼% notes toward the higher point.

Another trader said the debt "started down a bit from yesterday but kind of came back some," ending around 69. Still, that was "a touch lower than yesterday's highs," he said.

OPTI is a Calgary, Alta.-based oil sands producer.

Government bond yields rise

Canadian government bonds fell on Wednesday after nearly a weeklong rally, tracking U.S. Treasuries after the last bond purchase of the week by the Federal Reserve Bank of New York and lower-than-expected home sales and third-quarter U.S. gross domestic product.

The Canadian 10-year note yield rose to 3.168% from 3.16%. The two-year note yield rose to 1.666% from 1.63%.

U.S. Treasuries fell on extremely thin trading on Wednesday, a source said.

"The belly of the curve is underperforming," the source said. "The seven-years are out about 8 basis points; the two's and 30's are about 2 basis points."

The yield on the 10-year note rose 4 bps to 3.34%. The two-year note yield rose 2 bps to 0.63%.

The U.S. third-quarter GDP and home sales both came in below projections.

The Commerce Department said the GDP rose to an annual rate of 2.6% in the third quarter from 2.5% but was below the consensus of 2.8%.

In other data, the National Association of Realtors said existing home sales increased 5.6% to 4.68 million in November, below expectations of an annual rate of 4.75 million.

In the last purchase operation for the week, the Federal Reserve Bank of New York bought $2.07 billion of 2021 to 2027 bonds on Wednesday as part of its $600 billion quantitative easing program to boost the U.S. economy. The Federal Reserve is scheduled to purchase at least $10 billion more of notes due 2013 through 2014 before the end of the year on Dec. 28 and Dec. 29.

Stephanie N. Rotondo contributed to this review

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