Canadian bonds fall; TransCanada, Canadian Pacific price U.S. deals; Thomson Reuters firms

By Cristal Cody

Prospect News, Sept. 20 - Canadian bonds fell on a quiet Monday as the market waited to see if the U.S. Federal Reserve implements additional quantitative easing at Tuesday's meeting to discuss monetary policy.

Canada's benchmark two-year bond yield rose to 1.495% from 1.453%. The 10-year bond yield rose to 2.935% from 2.933%.

In high-grade corporate debt, TransCanada Pipelines Ltd. and Canadian Pacific Railway Co. priced new deals in the United States, according to sources. The notes were seen trading tighter in the secondary market, traders said.

"The market is in good shape," a syndicate source said. "Equity markets are firmer, spreads are narrower and we're seeing some really good buying interest from accounts."

In a report on Monday, Statistics Canada said that foreign demand for Canadian bonds rose to C$5.17 billion. The demand for Canadian bonds has risen for 19 months straight.

No new issues were sold in Canada on Monday.

"There's nothing new today, but we do expect to see supply later this week," a source said.

Secondary trading was mostly quiet, while the notes Thomson Reuters Corp. sold the previous week traded stronger, according to sources.

"The Street knows a bit of supply is coming. Plus everybody's waiting to see what the Fed does," one source said.

Market observers do not expect a rate change from the U.S. Federal Reserve's policy setting Federal Open Market Committee meeting. But many Canadian analysts predict another interest rate increase by the Bank of Canada.

In economic data on Monday, Canadian wholesale sales fell in July for the fourth straight drop, according to Statistics Canada. Sales fell 0.1% to C$43.9 billion, while analysts had expected an increase.

TransCanada sells $1 billion

TransCanada Pipelines sold $1 billion of 3.8% 10-year senior notes (A3/A-) at a spread of Treasuries plus 112.5 bps, a source that worked on the deal said.

Bookrunners were Citigroup Global Markets and J.P. Morgan Securities.

Proceeds are going to partially fund capital projects, for general corporate purposes, and to reduce short-term debt of the corporation and its affiliates.

TransCanada's notes narrowed in secondary trading, according to sources.

The notes traded tighter at 111 bps bid, 108 bps offered soon after pricing, a trader said.

Late in the day the notes firmed 1 bp on the bid side to 110 bps bid, 108 bps offered, a source said.

The natural gas transporter is based in Calgary, Alta.

Canadian Pacific sells U.S. notes

Canadian Pacific Railway sold $350 million of 4.45% senior unsecured notes due 2023 (Baa3/BBB) to yield a spread of Treasuries plus 178 bps, a source said.

Morgan Stanley & Co. Inc. and Bank of America Merrill Lynch were the bookrunners.

Proceeds will be used to fund a voluntary prepayment of future pension contributions to a Canadian defined benefit pension plan.

In late afternoon secondary trading, the notes firmed to 175 bps bid, 171 bps offered, a trader said.

The rail transport company is based in Calgary, Alta.

Abitibi sells $850 million

Elsewhere in the Canadian securities market, AbitibiBowater Inc. priced an upsized $850 million issue of eight-year first-lien senior secured notes (B1//) at par to yield 10¼% on Monday, according to market sources.

The yield printed at the wide end of the 10% to 10¼% price talk.

JPMorgan, Citigroup and Barclays Capital were the joint bookrunners for the issue, which was upsized from $750 million.

Proceeds will be used to help fund the Montreal-based pulp and paper manufacturer's exit from Chapter 11.

AbitibiBowater filed bankruptcy on April 16, 2009 in the U.S. Bankruptcy Court for the District of Delaware.

Thomson Reuters stronger again

The new paper that Thomson Reuters sold the previous week continued to remain strong in the secondary market on Monday, a source said.

Thomson Reuters on Thursday sold C$750 million of 4.35% 10-year notes (DBRS: A) at 99.615 to yield 4.398%, or 143.6 bps over the Canadian government benchmark bond.

The notes were seen "another basis point tighter" on Monday to 134 bps bid, 130 bps offered, the source said. The securities were not offered or sold in the United States.

New York-based Thomson Reuters is a business and professional news provider.

Paul A. Harris contributed to this report

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