Ottawa sells 10-year serial bonds; American Express Canada five-year notes widen 25 bps

By Cristal Cody

Prospect News, Oct. 5 - Corporate bond issuers stayed on the sidelines on Wednesday while the City of Ottawa in Ontario brought a municipal deal to the market, sources said.

In a private placement deal, North American Palladium Ltd. announced that it sold C$70 million of 9.25% three-year senior secured notes.

Market activity lessened on the day as investors look to the outcome of a Bank of England monetary policy meeting on Thursday and jobs data on Friday.

The week is early with "still time" for new deals to come, a source said, noting a "big data week with non-farm payrolls out on Friday, but there's still time."

Canadian bond markets will close early on Friday and will be closed on Monday for the Thanksgiving holiday.

"If the market tone is OK, we could see some provincial issuance and maybe a corporate deal or two. There's some stuff in the pipeline, but we need a couple days of stability," one bond source said.

European equities rallied, giving a decent market tone and causing provincial spreads to come in about 1 basis point to 1.5 bps, a source said.

Corporate spreads tightened on average 3 bps to 4 bps on the day.

The Markit CDX Series 17 North American high-grade index firmed 2 bps to a spread of 145 bps.

In the secondary market, American Express Canada Credit Corp.'s 3.6% five-year medium-term notes reopened last week traded 25 bps wider, a source said.

Canadian financials are performing slightly better than U.S. financial paper, which has widened on the week, sources said.

"Deposit notes were 3 [bps] wider yesterday after being as wide as 5 or 6," a source said. "Late in the day, they had a decent bid and are 3 to 5 basis points tighter today."

Government bonds ended lower on Wednesday. The 10-year note yield rose 3 bps to 2.14%. The 30-year bond yield rose 2 bps to 2.73%.

Ottawa sells serials

The City of Ottawa (Aaa/AA+/) in Ontario sold C$75 million of municipal bonds with serial maturities through 2021 on Wednesday, according to an informed bond source.

The bonds priced with coupons of 1.1% to 3.4% to yield 1.11% to 3.44% over the 10 years.

CIBC World Markets Inc. was the lead manager and BMO Capital Markets Corp. was a co-manager of the sale.

The bonds are expected to settle on Oct. 19.

Primary sees activity

North American Palladium announced on Wednesday that it sold C$70 million of 9.25% three-year senior secured notes through a private placement.

The notes are due Oct. 4, 2014 with a company option to extend the term an additional year.

The precious metals company also issued one warrant with each note that entitles the holder to purchase 0.35 ounces of the metal palladium at a purchase price of $620 per ounce through the maturity.

The notes are guaranteed by the company's subsidiaries.

Proceeds will be used to fund the continued expansion of the Toronto-based company's Lac des Iles palladium mine in Northern Ontario and for general working capital.

American Express Canada wider

In trading, American Express Canada Credit's 3.6% notes due June 3, 2016 widened to 225 bps early on Wednesday, a bond source said.

The company sold C$200 million of the five-year medium-term notes (A2/BBB+/DBRS: A) on Sept. 27 at a spread of 200 bps over the Government of Canada benchmark.

"It's definitely widened," the source said.

The company originally sold C$400 million of the notes on June 1 at a spread of 135 bps over the Canadian government benchmark.

American Express Canada is a division of the New York-based credit-card company American Express Co.

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