Skylink edges higher, Newalta dips in muted day for trading; forward calendar stays light

By Cristal Cody

Prospect News, March 18 - Trading was quiet Friday in the Canadian bond markets as spring break took hold.

In the high-yield market, Skylink Aviation Inc.'s 12.25% notes due 2016 edged higher, a source said.

Also in trading, Newalta Corp.'s 7.625% senior notes fell slightly.

Looking to the week ahead, the new deal calendar is expected to remain sparse into the second week of spring break, sources said.

On Friday, Canada's government bond markets outperformed U.S. Treasuries.

"We've seen U.S. Treasuries go all over the place today," said Doug Porter, deputy chief economist at BMO Capital Markets. "It looks like the 10-year will end the day lower in the U.S. but a bit higher in Canada."

Canada's 10-year bond yield fell 2 basis points to 3.17% and the 30-year bond yield dropped 1 bp to 3.71%.

Treasuries were mixed, with the 10-year note yield up 2 bps to 3.27%. The 30-year bond yield dropped 2 bps to 4.41%.

Canada's bonds traded off of data released early in the day. Statistics Canada said consumer prices rose 2.2% in February, following a 2.3% increase in January, led by higher energy and gasoline prices. The core rate fell to 0.9%, the lowest on record since 1984.

"It was a moderately positive day for Canadian bonds," Porter said. "They outperformed the rest, and most of that is due to the CPI reading we got for February. Bonds generally benefited on the view the Bank of Canada is going to be in no general rush to start hiking general interest rates."

The Bank of Canada's next meeting is scheduled on April 12, but many rates are not predicted to rise until July.

"Our view is for quarter-point hikes in the second half of the year, taking the 1% rate to 2% by the end of the year," Porter said.

Skylink edges higher

Skylink Aviation's 12.25% notes due 2016 edged higher to 99 bid, 100 offered from 98.75 bid, 99.75 offered on Thursday. The notes were sold on March 8 at par.

The Toronto-based global charter company specializes in emergency airlifts and evacuations and logistical support for governments and corporations.

Newalta dips

Newalta's 7.625% senior notes due 2017 fell a quarter point to 105 bid, 106 offered, a source said. The company sold the notes at par on Nov. 18.

Newalta is a Calgary, Alta.-based industrial waste management and environmental services company.

OPTI steady

Among other recent notables, OPTI Canada Inc.'s 7 7/8% and 8¼% subordinated notes due 2014 were "pretty much flat," a trader said, quoting the paper around 52.

The bonds had been gaining in the previous two sessions following the release of a monthly production report.

Stephanie N. Rotondo contributed to this review

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