Canadian bond issuance quiet, expected to rise in September; Kinross Gold paper widens

By Cristal Cody

Prospect News, Aug. 24 - Quiet, thin trading marked a third day in the Canadian bond markets on Wednesday as investors look to Friday's speech by U.S. Federal Reserve chairman Ben Bernanke.

New issuance activity in the corporate and provincial markets should pick up in September, sources said.

On the provincial side, there "has not really been anything since Quebec came in the U.S.-dollar market last week," a bond source said. "We've seen issuance in the provincial market become choppy coinciding with what has been an intense volatility in global financial markets. Nonetheless, provincial governments are on track to hit their borrowing targets for the current fiscal year."

Provincial bond deals are expected to pick up for the first half of September, one bond source said.

"Once we get into September, we can expect to see a resurgence of issuance, at least for a few weeks, but then we very quickly have to deal with the provincial election blackout," the source said of October elections. "Ontario and Manitoba in particular are dealing with election-related blackouts. That's part of the reason both of those provinces have been very careful to get their borrowing programs ahead of schedule."

In the high-grade secondary market, Kinross Gold Corp.'s bonds traded wider as gold prices sank on Wednesday, a trader said.

Meanwhile, high-yield bonds were mostly flat in light trading, a trader said.

"Basically nothing's happening today," the trader said, noting "very light" trading.

"There's collective selling but no panic. It's just quiet because there's not a lot going on," the trader said.

Before trading "gets heavy," investors are awaiting Friday's speech from Bernanke and for more stability in the equities markets, the trader said. "It's keeping clients on the sidelines."

Paramount Resources Ltd.'s 8¼% senior notes due 2017 (Caa2/B+) were trading unchanged on the day, a trader said.

Also in trading, Noranda Operating Trust's 6 7/8% notes due 2016 and Savanna Energy Services Corp.'s 7% senior notes due 2018 edged lower in the secondary market.

In economic data, the Conference Board of Canada index of consumer confidence fell 6.6 points to 74.7 in August, the fourth straight monthly decline and the lowest level since July 2009.

Canada Mortgage and Housing Corp. said Wednesday that it expects housing starts to be steady this year and in 2012. The agency forecast an average 183,200 units will be built in 2011 and about 183,900 new homes will be built in 2012.

Government bonds dropped on better durable goods orders data in the United States. Canada's 10-year note yield rose 10 basis points to 2.46% from 2.36%. The 30-year bond yield climbed 8 bps to 3.08%.

Kinross Gold widens

Kinross Gold's U.S. dollar-denominated high-grade senior notes (Baa3/BBB-/BBB-) widened in the secondary market as gold prices fell on Wednesday, a trader said.

The tranche of 3.625% notes due 2016 traded late afternoon at 285 bps offered. The notes were sold in a $250 million tranche at a spread of Treasuries plus 270 bps.

Kinross Gold's 6.875% bonds due 2041 widened to 340 bps offered, the trader said. The company sold the $250 million offering to yield 315 bps plus Treasuries.

The company sold the notes on Aug. 16.

The mining and gold ore processing company is based in Toronto.

Paramount Resources flat

In Canada's high-yield secondary market, Paramount Resources' 8¼% senior notes due Dec. 13, 2017 were quoted flat at 101 bid, 103 offered, a trader said.

The company sold a C$70 million add-on to the issue on Jan. 27 at 103. The notes originally were priced at par on Nov. 30, 2010.

Calgary, Alta.-based Paramount Resources is an oil and natural gas exploration, development and production company.

Noranda Operating Trust lower

Also in the Canadian secondary market, Noranda Operating Trust's 6.875% senior notes due Dec. 28, 2016 (DBRS: BB) were quoted at 99.5 bid, 100.5 offered, according to a trader.

The company sold C$90 million of the senior notes at par to yield 6 7/8% on July 22.

Noranda Operating Trust is owned by Toronto-based Noranda Income Fund and has a 75% interest in Noranda Income LP, which owns the Canadian Electrolytic Zinc metal processing facility in Quebec.

Savanna Energy Services down

Savanna Energy Services' bonds also traded weaker. The company priced C$125 million 7% senior notes due May 25, 2018 (/B+/DBRS: B) at par on May 19. The notes were quoted at 99 bid, 101 offered, a trader said Wednesday.

Calgary, Alta.-based Savanna Energy is a drilling and well servicing provider in the oil and gas industry.

OPTI Canada edges higher

Separately, a trader said OPTI Canada Inc.'s notes "moved a little," with the 8¼% notes due 2014 changing hands at 63, which he called "up slightly." The 7 7/8% notes due 2014 were active at 63 bid, 63.5 offered, both on "some volume."

Meanwhile, the trader said Catalyst Paper Corp.'s 11% notes due 2016 were at 65 bid, 66 offered, up 1 point, with "some activity in that today, but its 7 3/8% notes due 2014 were at 28 bid, 30 offered with "no activity - the activity was all in the 11s, but it wasn't a big change."

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