Lanesborough REIT sells five-year bonds, warrants; Canadian two-year bonds hit by sell-off

By Cristal Cody

Prospect News, Dec. 23 - The Canadian corporate bond market remained quiet into Thursday, with one small sale announced from Lanesborough Real Estate Investment Trust.

Very light activity is expected on Friday and the remainder of the year.

"Next week is even quieter," a source said.

Lanesborough REIT said Thursday that it completed the initial closing of the previously announced sale of C$12.637 million of five-year mortgage bonds and warrants.

The sale included 12,637 units, which are comprised of 12,637 bonds and 12,637,000 warrants, at a price of C$1,000 per unit. Each unit has one five-year 9% second mortgage bond and 1,000 trust unit purchase warrants.

The REIT said it may sell up to C$3.363 million, or a maximum of 3,363 units, before March 17, 2011.

The bonds and warrants were scheduled to start trading Thursday on the Toronto Stock Exchange under the trading symbols "LRT.NT.A" and "LRT.WT.A," respectively.

The bonds are redeemable at any time at a price equal to 101% of the principal amount of the bonds, plus accrued and unpaid interest.

Proceeds will be used to redeem existing bonds and repay the principal amount of series F debentures upon maturity.

The company is a Winnipeg, Man.-based real estate investment trust that owns property across western Canada, in Ontario and in the Northwest Territories.

Government bonds fall

Canadian government bonds fell, pushing yields up on economic data and following U.S. Treasuries on low holiday trading volumes, sources said.

The yield on the Canadian 10-year note rose to 3.183% from 3.17%. The two-year note yield rose to 1.698% from 1.67%.

"The market had a mixed day," said Eric Lascelles, chief Canada macro strategist at TD Securities in Toronto. "Bonds sold off today and have done so in most countries. Canada sold off more aggressively in the two-year sector."

The spate of economic data out on Thursday drove much of the light trading activity. U.S. bond markets closed early for the Christmas holiday.

"The market's feeling reasonably good about what happened today, and that applies to the Canada GDP," Lascelles said. "It's weaker than what the market expected but there's some solace in the growth there."

Statistics Canada said on Thursday that Canada's gross domestic product rose 0.2% in October following a 0.1% drop in September. Growth was mostly driven by mining and oil and gas extraction industries.

Payroll figures rose, with average weekly earnings of non-farm payroll employees up 4.4% in October.

U.S. Treasuries also fell on stronger economic data and positioning portfolios for end-of-year business.

The yield on the 10-year note rose to 3.38% from 3.34%. The two-year note yield rose 2 bps to 0.65%.

U.S. durable good orders fell 1.3% to a seasonally adjusted $193.71 billion, the Commerce Department said.

The Labor Department said initial unemployment claims fell 3,000 to 420,000 for the previous week.

Personal income and spending edged up in November.

The Treasury Department plans to auction a total of $99 billion of two-, five- and seven-year notes on Monday, Tuesday and Wednesday, but demand may be sketchy.

"We've got a lot of supply next week in an environment where it's probably going to be extremely illiquid," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co.

"Not only are people out, but people are having their books closed for the year, so I think Treasuries could struggle," she said.

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