Caisse Centrale Desjardins, Export Development, Quebec wake up markets; energy bonds 'hot'

By Cristal Cody

Prospect News, Feb. 8 - Canadian bond traders saw more activity on Tuesday with new offerings from Caisse Centrale Desjardins, Export Development Canada and the Province of Quebec.

Quebec sold an additional C$500 million in a reopening of its 4.25% 10-year notes priced the previous week.

"This was the first reopening of their 2021 benchmark," a source said. "They like to build up size in their benchmark bonds quickly. We saw very good demand for the deal when it was launched and some good participation from accounts both in Canada and the United States."

Provincial bond spreads closed 1 basis point wider on the day, a source said.

While oil prices fell earlier in the day, energy bonds ended firmer on Tuesday. The oil and gas sector ended the day "2 to 3 basis points better," a trader said.

Bonds from Cenovus Energy Inc. and Vermilion Energy Inc. were stronger in very light trading, sources said.

Energy is "still a hot sector," one source said.

Canadian government bonds fell following the drop in U.S. Treasuries, sending yields up across the curve. The 10-year bond yield rose to 3.49% from 3.44%. The two-year note yield closed up at 1.882% from 1.83%.

Treasuries started the day down and ended Tuesday cheaper, sending yields higher across the curve.

The 10-year Treasury note rose 11 bps to 3.74% from 3.63%. The two-year note yield rose to 0.85% from 0.76%.

"The key drivers were the disappointing three-year auction and some improved confidence in terms of the economy from the retail sales number and small business numbers," said Nick Kalivas, a market strategist at MF Global.

The Treasury Department auctioned $32 billion of three-year notes on Tuesday at a yield of 1.34%. The Treasury will sell $24 billion of 10-year notes on Wednesday and $16 billion of 30-year bonds on Thursday.

The Bank of Canada will auction C$3.2 billion of 2% notes due 2014 on Wednesday.

Centrale Desjardins prices

Caisse Centrale Desjardins (Aa1/AA-/DBRS: AA) sold C$500 million of floating-rate deposit notes due Feb. 11, 2014 at par on Tuesday, an informed source said.

The notes priced in line with guidance at 52 bps over the three-month Canadian Dealer Offered Rate. The deal was upsized from C$300 million.

Desjardins Securities Inc. was the lead manager.

Centrale Desjardins is a cooperative and the treasurer for Desjardins Group, a Quebec-based financial services company.

Kangaroo bonds price

Export Development Canada (Aaa/AAA/DBRS: AAA) sold A$500 million of 6% kangaroo bonds due Feb. 18, 2016 at 99.787 to yield 6.05%.

The bonds priced at a spread of 53.25 bps over the Australia Commonwealth Government benchmark.

Commonwealth Bank of Australia, Deutsche Bank Securities Inc. and RBC Capital Markets Corp. were the bookrunners.

The deal was launched under Export Development Canada's Australian medium-term note program. Ottawa-based Export Development Canada provides financing, insurance and risk management to Canadian exporters and investors expanding international operations.

Quebec adds on

The Province of Quebec (Aa2//AA-/DBRS: A) sold an additional C$500 million in a reopening of its 4.25% benchmark notes due Dec. 1, 2021 at 99.66 to yield 4.289% on Tuesday, an informed source said.

The notes priced at a spread of 73 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

The original issue was priced on Feb. 3 at 99.652 to yield 4.29%, or a spread of 75.5 bps over the Government of Canada benchmark.

The issue now has a total of C$1 billion outstanding.

Cenovus better

Cenovus Energy's notes have firmed in trading the past couple of days, sources said.

The company's 5.7% notes due 2019 were offered at 58 bps on Tuesday, in from 61 bps seen on Monday, a trader said.

Another trader saw the notes at 65 bps bid, 60 bps offered "yesterday afternoon in the Street."

Cenovus Energy is a Calgary, Alta., oil company.

Vermilion up

Vermilion Energy's new bonds saw "very little trading in the first couple of days" since issuance, a source said.

The company sold C$225 million of 6.5% senior notes (/BB-/DBRS: BB) due 2016 on Thursday at par, or a spread of 383.3 bps over the Government of Canada benchmark.

Early Tuesday, the notes were quoted at 102.625 bid, 103.125 offered, a source said.

Vermilion Energy's bonds were quoted ending the day at 102.75 bid, 103.75 offered on "very little trading," the source said.

Vermilion Energy is a Calgary, Alta.-based oil and gas producer.

OPTI quiet pre-earnings

Trading in OPTI Canada Inc. bonds was "pretty quiet," a market source said, as the market readies for the company's earnings report on Thursday.

"That is what will move it," the source said of the pending results.

He saw the 7 7/8% and 8¼% notes due 2014 at 53¼ bid, 54¼ offered. "I'd say unchanged."

Another trader, however, called the notes almost a point weaker, trading around 523/4.

OPTI Canada is a Calgary, Alta.-based oilsands producer.

Stephanie N. Rotondo contributed to this review

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