Bank of America's Canadian dollar bonds widen, OPTI Canada steady in trade; primary quiet

By Cristal Cody

Prospect News, May 2 - The Canadian bond markets stayed quiet on Monday, except for activity in Bank of America Merrill Lynch's bonds, according to sources.

"Our spreads are almost unchanged with the exception of Bank of America," one source said late afternoon. "Bank of America spreads in Canada have widened pretty dramatically. Bonds that had been trading at almost par are now trading C$7 lower. It looks like they may or may not be calling a bond the market thought was going to be called."

Bank of America's 4.81% subordinated notes due 2016 that priced in a Canadian dollar-denominated deal is scheduled to be called on June 1. Traders expected the notice to be released on Monday. Bank of America representatives were not immediately available for comment.

The bonds "were trading to the call date. After the call date, they go from a fixed coupon to a floating rate of CDOR plus 60 [basis points]," the source said. "If they're not called, tomorrow may be some of the biggest trading."

The bond markets also were quiet due to general elections in Canada, but the primary market is expected to gain traction after the corporate earnings blackout period, a source said.

"The quarter has closed, but a lot of them haven't released results yet," the bond source said. "Most companies will tend to not issue during the blackout period, but we have a heavy slate of earnings releases this week, so we expect issuance to pick up more."

Canadian government bonds closed slightly better, sending yields down about 1 bp. The 10-year bond yield dropped 1 bp to 3.2%. The 30-year bond yield was flat at 3.69%.

Treasuries were mostly unchanged on Monday.

Stocks rallied early on the news that Osama bin Laden had been killed but finished the day down. The benchmark 10-year Treasury note yield fell 1 bp to 3.28%. The 30-year bond yield fell 2 bps to 4.38%.

"We've been up a little bit and down a little bit all day long," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co. "The bottom line is Treasuries and the rest of the economy are still facing the same problems."

OPTI debt steady

In trading, OPTI Canada Inc.'s subordinated issues - the 7 7/8% and 8¼% notes due 2014 - were called unchanged at 53 bid, 53½ offered by a trader.

There has been no news out on the Calgary, Alta.-based oil-sands producer since it released its quarterly report last week. The company said it was unlikely to meet its annual production target.

Catalyst Paper flat

Catalyst Paper Corp.'s 7 3/8% notes due 2014 were staying at 69 bid, 70 offered, where they had been quoted on Friday as well.

"There was not a lot of trading, just a couple of trades" in the Richmond, B.C.-based paper manufacturer's bonds, a source said.

A source at another desk quoted the bonds going out at 69 bid, calling that down nearly three-quarters of a point.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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