Prince Edward Island prices; provincials, Finning, ScotiaPlaza, Bell firm; Cominar flat

By Cristal Cody

Prospect News, June 19 - The Government of Prince Edward Island tapped the Canadian bond markets on Tuesday while some stick to the sidelines awaiting the Federal Reserve's Federal Open Market Committee outcome on Wednesday, informed bond sources said.

"Thin today," a syndicate source said. Corporate bonds traded a "little bit better but it's still very, very quiet. Most issuers rushed to get in before the Greek vote."

Prince Edward Island raised C$200 million in an offering of 30-year bonds that later traded about ½ basis point tighter on the day, a source said.

National Bank of Canada sold a U.S. dollar-denominated $1 billion offering of three-year senior notes on Tuesday with about $2.5 billion in demand on the books for the deal.

In other activity in Canada, Industrial Alliance Insurance and Financial Services Inc. reopened its five-year rate reset preferred stock to sell an additional C$100 million.

Primary activity is expected to stay light in the corporate bond markets with a few offerings possible in the provincial markets over the week, sources said.

"There has been good tone and we have seen spreads today between 2 and 3 basis points tighter across the curve and across most names," a provincial source said. "We've seen broad-based buying. With that backdrop, we're hopeful to see one or two names in the domestic market. The term that probably is best is 10 years right now."

In other secondary trading on Tuesday, the Province of Ontario's long bonds tightened 2 bps on the day, a source said.

Canada Housing Trust's 2.05% Canada Mortgage Bonds due June 15, 2017 reopened a week ago are in about 2½ bps.

In the investment-grade secondary market, new Canadian bonds are trading flat to moderately better.

Finning International Inc.'s new long bonds are 4 bps better since issuance, a source said on Tuesday.

ScotiaPlaza's 3.21% amortizing first mortgage bonds sold earlier in the month have tightened 2 bps.

New bonds from GE Capital Canada Funding Co., Intact Financial Corp. and Bell Canada traded about 1 bp tighter.

Bonds trading unchanged included Canadian Natural Resources Ltd.'s seven-year notes and Cominar Real Estate Investment Trust's five-year debentures.

The Markit CDX Series 18 North American investment-grade index firmed 4 bps to a spread of 115 bps on the day.

Government bonds ended weaker with yields up across the curve. Canada's 10-year note yield closed 5 bps higher at 1.76%. The 30-year bond yield rose 2 bps to 2.36%.

Prince Edward Island prices

In the domestic market, Prince Edward Island (Aa2/A/DBRS: A) priced C$200 million of 3.65% 30-year bonds at 99.728 to yield 3.665% on Tuesday, according to informed sources.

The bonds due June 27, 2042 came at a spread of 129 bps over the Government of Canada benchmark.

Scotia Capital Inc. was the lead manager.

Prince Edward Island last tapped the domestic debt markets on July 26, 2011 with a C$100 reopening of its 4.6% bonds due May 19, 2041 priced at 95.5 bps over the Government of Canada benchmark.

In the secondary market, the bonds traded in about ½ bp, a source said.

National Bank of Canada eyed

In the U.S. market, National Bank of Canada priced $1 billion of 1.5% three-year senior notes on Tuesday at a spread of Treasuries plus 120 bps, an informed source said.

The notes were priced tighter than guidance in the 130 bps area.

The paper (Aa2/A/) was sold at 99.758 to yield 1.583%.

There is no call option.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, National Bank of Canada Financial and Wells Fargo Securities LLC were the bookrunners.

Proceeds are being used for general corporate purposes.

The notes are guaranteed by National Bank of Canada's New York branch.

The financial services company is based in Montreal.

Industrial Alliance returns

Industrial Alliance Insurance and Financial Services announced on Tuesday that it sold C$100 million in an add-on to its non-cumulative rate reset class A preferred shares to yield 4.3% for the initial period up to June 30, 2017.

The company sold 4 million shares of the series G five-year preferred stock (DBRS: Pfd-2) at C$25.00 per share.

BMO Capital Markets Corp. was the lead manager.

On June 30, 2017 and on June 30 every five years thereafter, the dividend rate will reset to the then current five-year Government of Canada bond yield plus 285 bps.

The shares are callable on June 30, 2017 and on June 30 every five years at C$25.00 per preferred plus accrued dividends.

The sale is in addition to the C$150 million, or 6 million shares, the company priced with an initial dividend rate of 4.3% on May 24 and settled on June 1.

Proceeds will be used for general corporate and capital planning purposes and will be added to Industrial Alliance's capital base.

The life and health insurance company is based in Quebec City.

Ontario firms

Ontario's 3.5% bonds due June 2, 2043 opened on Tuesday at 110 bps and traded going out tighter at 108 bps, a source said.

The Province of Ontario (Aa2/AA-/DBRS: AA) sold C$600 million in a reopening of the long bonds at a spread of 104 bps over the Government of Canada benchmark on May 10.

The province originally sold the issue on Jan. 26 in a C$600 million offering at 88 bps over the Government of Canada benchmark.

Canada Housing stronger

Also in the secondary market, Canada Housing Trust No. 1's 2.05% Canada Mortgage Bonds due June 15, 2017 traded going out on Tuesday 1 bp tighter on the day 41½ bps, a source said.

Canada Housing Trust (Aaa/AAA/DBRS: AAA) sold C$5 billion in a reopening of the bonds due June 15, 2017 at a spread of 43 bps over the Government of Canada benchmark on June 13.

"It closed yesterday at 41½ [bps]," the source said. "That issue went very well last week."

Canada Housing Trust first sold the issue on March 15 in a C$5 billion offering priced at a spread of 39 bps over the Government of Canada benchmark.

The trust is a unit of Canada Mortgage and Housing Corp., which provides financing, mortgage loan insurance, mortgage-backed securities and housing policy and programs.

Finning firms

In the corporate secondary market, Finning International's 5.077% medium-term notes due June 13, 2042 traded tighter at 268 bps bid, 4 bps better than issue price, a source said on Tuesday.

Finning (/BBB+/DBRS: A) sold C$150 million of the notes at a spread of 272 bps over the Government of Canada benchmark on June 8.

The heavy equipment dealer is based in Vancouver, B.C.

ScotiaPlaza tightens

The 3.21% amortizing first mortgage bonds due 2019 (DBRS: A) that ScotiaPlaza, or SP LP and SP1 LP sold in a C$650 million offering at 180 bps over the government benchmark on June 8 are trading 2 bps better at 178 bps bid, a source said on Tuesday.

The SP and SP1 LP are subsidiaries of Toronto-based Dundee Real Estate Investment Trust and Downsview, Ont.-based H&R REIT, which purchased Bank of Nova Scotia's Scotia Plaza complex in Toronto.

GE Capital Canada better

GE Capital Canada Funding Co.'s 3.55% notes due June 11, 2019 traded 1 bp better, a source said on Tuesday.

GE Capital Canada (A1/AA+/) sold C$350 million of the notes at a spread of 207.3 bps over the Government of Canada benchmark on June 6.

GE Capital Funding Canada is the Canadian financing arm for GE Capital Canada.

Intact Financial in 1 bp

Intact Financial's 5.16% medium-term notes due June 16, 2042, which priced at a spread of 278 bps over the Canadian government benchmark, traded in 1 bp, according to a bond source on Tuesday.

The company (Baa1//DBRS: A) sold C$200 million of the 30-year medium-term notes on June 12.

Toronto-based Intact Financial is Canada's largest provider of property and casualty insurance.

Bell Canada edges tighter

Bell Canada's new 3.35% series M-25 debentures due June 18, 2019 were seen 1 bp tighter on Tuesday, a bond source said.

Bell Canada (Baa1/BBB+/DBRS: A) sold C$1 billion of the debentures at a spread of 185 bps over the government benchmark on June 13.

The telecommunications company is based in Montreal.

Cominar REIT flat

Cominar Real Estate Investment Trust (DBRS: BBB) sold C$125 million of 4.274% series 1 debentures due June 15, 2017 at a spread of 295 bps over the Government of Canada benchmark on June 12.

"Cominar is new issue bid," a bond source said on Tuesday.

Quebec City-based Cominar REIT holds office, retail and industrial properties in Quebec and Ontario.

Canadian Natural unchanged

Canadian Natural Resources' 3.05% notes due June 19, 2019 were seen flat at new issue bid, a bond source said on Tuesday.

Canadian Natural Resources (Baa1/BBB+/DBRS: BBB) sold C$500 million of the notes at a spread of 155 bps over the Government of Canada benchmark on June 14.

Calgary, Alta.-based Canadian Natural is a natural gas and crude oil exploration, production, acquisition and marketing company.

Andrea Heisinger contributed to this review

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