Ontario, Saskatchewan, Financement-Quebec, New Brunswick flood market; corporates flat

By Cristal Cody

Prospect News, Jan. 26 - A flurry of provincial bond issuance kept the Canadian markets busy on Thursday with four deals, a rarity in recent months by most accounts.

The provinces of Ontario, Saskatchewan, New Brunswick and Financement-Quebec, a Quebec provincial agency, all tapped the bond market.

"There's a lot of good account interest, people looking to put money to work after the Fed yesterday," a provincial bond source said. "It's risk-on."

All the deals were received well.

New Brunswick's deal was a "slam dunk" and Saskatchewan has a "lot of scarcity value in the name," a source said. "The last deal from them was in August 2010, so that deal just flew off the shelves."

Ontario's sale may have taken slightly more time to clear, a source said.

"Some people thought it came a little rich," the source said. "It came at a 1 basis point inversion to the Ontario 41s. At the time they were trading at 89 [bps] so it came 1 bp lower and a lot of people thought it should be only a half basis point."

Provincial bond spreads stayed firm on the day, ending about ½ bp tighter.

In trading, the provincial bonds priced earlier were seen wrapped around issuance.

Corporate issuers were quiet on Thursday with some out due to earnings season, sources said.

The Markit CDX Series 17 North American investment-grade index firmed 1 bp to a spread of 101 bps.

In the secondary market, Canadian Pacific Railway Co.'s U.S. dollar-denominated bonds ended unchanged on the day and over the week, a source said.

Canadian government bonds rallied in the middle of the curve to the long end a day after the Federal Reserve said it would leave rates exceptionally low through 2014. Canada's 10-year note yield fell 3 bps to 2.01%. The 30-year bond yield dropped 2 bps to 2.62%.

Ontario sells new long bonds

The Province of Ontario (Aa1/AA-/DBRS: AA) priced C$600 million 3.5% bonds due June 2, 2043 at 99.187 to yield 3.543% on Thursday, a bond source said.

The bonds came at a spread of 88 bps over the Government of Canada benchmark.

CIBC World Markets Inc. was the lead manager. RBC Capital Markets Corp., TD Securities Inc., BMO Capital Markets Corp., National Bank Financial Inc., Scotia Capital Inc. and Merrill Lynch Canada Inc. were the co-managers.

Saskatchewan goes quickly

The Province of Saskatchewan (Aa1/AAA/DBRS: AA) sold C$300 million 3.4% debentures due Feb. 3, 2042 at 99.126 to yield 3.447% in a sale that drew quick interest, according to bond sources.

The debentures priced at 78 bps over the Government of Canada benchmark.

The long bonds are non-callable.

CIBC World Markets was the lead manager. Co-managers were RBC Capital Markets, TD Securities, BMO Capital Markets and Scotia Capital.

New Brunswick taps tranches

The Province of New Brunswick (Aa2/AA-/DBRS: A) sold C$400 million in reopenings of two tranches of debentures on Thursday, according to an informed source.

The province sold C$300 million in an add-on to its 3.35% debentures due Dec. 3, 2021 at 102.907 to yield 3.006%, or a spread of 96 bps over the Government of Canada benchmark. The total outstanding now is C$900 million.

In the second tranche, New Brunswick sold C$100 million in a reopening of its 4.8% debentures due June 3, 2041 at 119.865 to yield 3.686%, or a spread of 102.5 bps over the government benchmark. The total outstanding is C$1 billion.

TD Securities and CIBC World Markets were the lead managers. Co-managers were RBC Capital Markets and BMO Capital Markets.

Financement-Quebec prices

Financement-Quebec sold C$500 million in a reopening of its 2.4% medium-term notes due Dec. 1, 2018 at 99.823 to yield 2.428% on Thursday, an informed source said.

The notes (Aa2/A+//DBRS: A) priced at a spread of 84 bps over the Government of Canada benchmark.

National Bank Financial and CIBC World Markets were the lead managers. Co-managers included RBC Capital Markets, Casgrain & Co. Ltd., TD Securities, BMO Capital Markets, Laurentian Bank Securities, Inc., Merrill Lynch Canada, Scotia Capital and Desjardins Securities Inc.

The notes are non-callable.

The agency sold the original issue on Jan. 19 in a C$500 million offering at 99.961 to yield 2.406%, or 86 bps over the Canadian government benchmark. The total outstanding now is C$1 billion.

Financement-Quebec is a Quebec provincial agency that provides financial services to public institutions, including health care, school boards, community colleges and universities.

Canadian Pacific Railway flat

Canadian Pacific Railway's 4.5% notes due 2021 and 5.75% bonds due 2033 traded unchanged, according to a bond source.

The notes due 2021 (Baa3/BBB-/) were flat at 236 bps over Treasuries. The issue priced on Nov. 28 at a spread of Treasuries plus 275 bps.

The tranche of 5.75% long bonds also ended unchanged at 285 bps over Treasuries. The bonds were sold at a spread of 300 bps.

The railroad operator is based in Calgary, Alta.

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