Prince Edward Island lone issuer; bonds unchanged to weaker on low volume; OPTI trades up

By Cristal Cody

Prospect News, March 16 - The Province of Prince Edward Island surprised the market with a deal on Wednesday, as bonds in the broader market remain flat to weaker on the volatility caused by the crisis in Japan.

Issuance is expected to stay quiet on the corporate and high-yield front for the next two weeks during the spring break in Canada.

But one deal is expected to price on Thursday. Canada Housing Trust plans to sell about C$6.25 billion of mortgage bonds due 2016.

The deal is expected to price with a spread in the area of 27 basis points, plus or minus half a basis point, a source said. Dibs already have been placed on most of the issue, one source said.

Canada's high-yield bond spreads were mostly flat again on Wednesday, and trading volume is expected to stay low over the next two weeks, a source said.

Precision Drilling Corp.'s 6.5% notes due 2019 (Ba2/BB+/) traded Wednesday at 100.25 bid, 101.25 offered from 100.625 bid, 101.375 offered on Tuesday. The notes priced on March 10 at par.

Precision is a Calgary, Alta.-based equipment and services provider for the oil and gas industry.

A trader also saw Calgary, Alta.-based energy operator Compton Petroleum Corp.'s 10% notes due 2017 down 1 point.

In other bonds, OPTI Canada Inc. was the nom du jour after the company released a production report from its Long Lake joint venture project. The numbers from February came in below those seen in January, but instead of dropping, the bonds headed upward.

Government bonds rally

Government bonds rose again on Wednesday, pushing yields down as investors sought safer debt havens.

Canada's two-year note yield dropped 10 bps to 1.53%, while the 10-year bond yield fell to 3.14% from 3.2%.

"The fact that Canadian bank stock sold off today tells you there's panic in the markets," said Sheldon Dong, vice president of fixed-income strategy at TD Waterhouse Canada in Toronto. "The markets are operating on speculation, uncertainty and emotion."

U.S. Treasuries also ended higher a third day on the growing fears of Japan's nuclear crisis, pushing yields down 5 bps to 10 bps on longer duration bonds. The benchmark 10-year note yield fell 10 bps to 3.2%.

The Federal Reserve Bank of New York said in a statement that it had to push back its scheduled round of asset buybacks by an hour due to market volatility. The Federal Reserve purchased $6.58 billion of Treasuries due 2015 through 2016 as part of the $600 billion quantitative easing program to stimulate the U.S. economy.

Prince Edward Island prices

In the first deal of the week, Canada's Province of Prince Edward Island (Aa2/A/DBRS: A) sold C$100 million in a new benchmark deal on Wednesday, a source said.

The 4.6% bonds due May 19, 2041 price at 99.295 to yield 4.644%, or 93.5 bps over the Government of Canada benchmark.

The sale completes the province's fiscal 2010/2011 borrowing schedule, a source said.

Scotia Capital Inc. was the lead manager.

OPTI up on production report

A trader saw "a couple hundred million" of OPTI Canada bonds trading during the session on the back of the release of a monthly production report from its Long Lake joint venture project.

The 7 7/8% and 8¼% subordinated notes due 2014 were "up a little bit" at 51 bid, 51½ offered, the trader said. The 9% "super seniors" due 2012 were also better at par bid, par ½ offered and the 9¾% notes due 2013 at 98 bid, 99 offered.

Another trader called the subordinated paper a quarter-point higher around 51.

A third trader said that OPTI Canada's bonds "seemed like they had a pretty busy day."

He saw the Calgary, Alta.-based oil-sands energy company's 8¼% notes due 2014 ending in a 51½ bid, 52 offered neighborhood on "good volume" but pretty much unchanged to perhaps ½ point higher.

Bitumen production at the Long Lake oil-sands project fell to 23,100 barrels per day in February, due in part to a 10-day maintenance shutdown. The company had reported production of 27,000 barrels per day in January.

The project - with partner Nexen Inc. - has continued to produce at lower-than-expected levels, due mostly to operational problems. OPTI and Nexen have yet to produce at capacity, which is 72,000 barrels per day.

OPTI is attempting to sort out its balance sheet and has said several times that its financial health depends heavily on ramping up production at Long Lake.

Compton Petroleum down

A trader also saw Calgary, Alta.-based energy operator Compton Petroleum's 10% notes due 2017 down 1 point at 70 bid, 70½ offered, characterizing the activity level as moderate. "There were some trades in that name."

Paul Deckelman and Stephanie N. Rotondo contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.