Greater Toronto Airport Authority sells long bonds; Paramount Resources, OPTI bonds gain

By Cristal Cody

Prospect News, Feb. 17 - The Greater Toronto Airport Authority brought the lone deal sold in the Canadian bond markets on Thursday, according to sources.

The long bond was upsized to C$600 million from C$350 million.

The primary calendar is expected to stay light on Friday and with bond markets closed on Monday.

"We're not expecting anything from provincials," one source said. "There's always the possibility of corporates."

On Thursday, shareholders of Canadian Satellite Radio Holdings Inc. approved the merger of XM Canada and Sirius Canada Inc. Traders soon expect an offering of C$150 million of notes talked in the 9.75% yield area to help finance the merger.

Trading remained positive in Canadian high-yield bonds with notes from Paramount Resources Ltd. active, a source said.

Paramount's 8.25% series 2 senior notes due Dec. 13, 2017 were quoted at 103.375 bid, 104.375 offered. The Calgary, Alta.-based oil and gas company originally priced the notes (Caa2/B+) on Nov. 30 when it sold C$300 million at par. The issue was reopened with a C$70 million add-on on Jan. 28 priced at 103.

In Canadian government bond supply, the Bank of Canada said it will auction C$400 million of 1.5% real return bonds due Dec. 1, 2044 on Feb. 23.

Government yields dip

Canadian government bonds tracked U.S. Treasuries, with yields down on the day.

"You had a lot of data coming out of the U.S. and very little data coming out of Canada," said Ian Pollick, portfolio strategist at TD Securities Inc.

Canada's 10-year bond yield fell to 3.484% from 3.49%. The two-year bond yield fell to 1.902% from 1.93%.

Traders are watching for Canada's consumer price index data that will be released on Friday.

"We think it will tell people inflation is not a problem in Canada," Pollick said. "We expect on that report to see a flatter curve on the seven-year and 10-year sections."

Reports on a renewed round of Middle East unrest helped "put a bit into the curve" in Treasuries, a source said.

The two-year note yield fell to 0.76% from 0.83%. The 10-year note yield dropped 5 basis points to 3.57%.

The Labor Department said its consumer price index rose a higher-than-expected 0.4% in January and increased 1.6% year over year.

Also, the Labor Department said initial unemployment claims rose 25,000 to 410,000 the previous week.

In other data, the Federal Reserve Bank of Philadelphia's manufacturing index in the region was 35.9, up more than 16 points, the highest since February 2004.

Greater Toronto Airport prices

The Greater Toronto Airport Authority sold an upsized C$600 million of 5.3% medium-term notes due Feb. 25, 2041 at 99.97 to yield 5.302% on Thursday, a source said.

The MTNs (A2/A/DBRS: A) priced at a spread of 146 bps over the Government of Canada benchmark, compared to guidance of 148 bps over. The deal was upsized from C$400 million.

The MTNs have a Canada call at 36.5 bps over the government benchmark.

The deal was sold in Canada and under Rule 144A.

BMO Capital Markets Corp. was the bookrunner. CIBC World Markets Inc. was a co-lead manager.

On Wednesday, the airport authority called for the redemption of the remaining C$325 million outstanding of its 5.89% notes due 2013.

The authority manages the Toronto Pearson International Airport.

OPTI paper boosted

A trader said OPTI Canada Inc.'s subordinated issues popped about 4 points on the day, seeing the 7 7/8% and 8¼% notes due 2014 closing at 51 bid, 52 offered.

The senior notes, he added, were climbing toward par, as those issues were "money good." He saw the 9% "super seniors" due 2012 at 99¾ bid, par ¾ offered and the 9¾% notes due 2013 at 99 bid, 99½ offered.

"Everybody is starting to do reports on them and everybody has a different take on it," he said as a way of explaining the day's gains. On top of that "there is so little to choose from" in the distressed debt realm.

Another trader called the subordinated notes 3 points better, ending around 51.

There has been no fresh news out on the Calgary, Alta.-based oil sands producer since it released its quarterly results last week.

Stephanie N. Rotondo contributed to this review

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