Royal Bank of Canada, Fortis Alberta bring deals; new deals tighter in secondary trading

By Cristal Cody

Prospect News, Oct. 22 - Canadian bond investors stayed active with two new deals hitting the markets on Friday, with the largest from Royal Bank of Canada.

After a quiet month, the week has been busy with new offerings, including from Brookfield Asset Management Inc. and Canadian Imperial Bank of Commerce, which sold C$1.5 billion in 3.15% 10-year debentures on Wednesday. The debentures due Nov. 2, 2020 priced at a spread of 134 basis points over the Canadian benchmark bond to yield 3.196%.

"It's been pretty good this week, with three deals the day before," a source said. "Everybody was waiting on supply."

In Friday's deal, the Royal Bank of Canada sold C$1.5 billion in 3.18% fixed- to floating-rate 10-year notes to "extremely good" demand, a source said.

The notes priced at 99.972 to yield 3.186%, or a spread of 130 bps over the Canada benchmark curve.

"It priced appropriately and is trading maybe 2 basis points tighter off the break," the source said.

The notes mature Nov. 2, 2020 but are callable after five years for an effective maturity date of Nov. 2, 2015.

RBC Capital Markets Corp. was the lead bookrunner.

Earlier on Friday, Canadian electric utility Fortis Alberta sold C$125 million in 40-year bonds on Friday, a source told Prospect News.

The 4.8% bonds due Oct. 27, 2050 priced at 99.929 to yield 4.804%, or 135 bps over the Canadian government benchmark.

The lead manager on the sale was BMO Nesbitt Burns Inc.

In secondary trading, the 40-year bonds came in slightly, a source said.

"It's a little tighter - 2 to 3 basis points," the source said.

The Calgary, Alta.-based utility is a subsidiary of Fortis Inc., Canada's largest investor-owned distribution gas and electric utility.

Canadian shorter-dated bonds rose on Friday on weaker economic data. Canada's two-year bond yield fell to 1.392% from 1.4%. The 30-year bond yield rose to 3.444% from 3.435%.

Earlier in the week, on Tuesday, the Bank of Canada left the key overnight interest rate at 1%.

Statistics Canada said Friday that the consumer price index rose 1.9% in the 12 months to September, following a 1.7% increase in August.

Core consumer prices, which exclude volatile energy prices, were up 1.5% in September.

Also, retail sales increased 0.5% to C$36.1 billion in August after flat sales the previous two months, the agency said.

U.S. debt was mixed on an absence of fresh economic data. The yield on the two-year Treasury note eased 1 bp to 0.36%. The 10-year benchmark note yield rose 2 bps to 2.56%. The 30-year Treasury bond yield fell 3 bps to 3.93%.

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