Canada Housing to sell mortgage bonds; British Columbia sells $750 million, bonds firm

By Cristal Cody

Prospect News, Sept. 15 - Canada's bond markets stayed quiet in primary activity with some potential for a deal to cap the week after a couple of days of stronger tone, sources noted on Thursday.

"We've had better tone with equities in positive territory for a few days; that seems to make people feel a little better about things," a bond source said.

One new offering of mortgage bonds is scheduled for the week ahead.

Canada Housing Trust (Aaa/AAA/DBRS: AAA) is expected to price C$5 billion to C$6 billion of new five-year Canada mortgage bonds, a bond source said Thursday.

"Next week, we're expecting CMBs in the market," the source said. "It trades off the secondary markets, so it will get priced based on where the current June bond is trading."

The existing 2.75% mortgage bonds due June 15, 2016 traded on Thursday at a spread of 33 basis points over the Canadian government benchmark, the source noted. The trust reopened the 2.75% five-year bonds on June 15 in a C$6 billion offering priced at a 25 bps spread.

Across the border, the Province of British Columbia sold $750 million of 10-year bonds on Thursday.

In the secondary market, the province's new bonds firmed about 1 bp on the bid side, a trader said.

Canadian provincial bond spreads were tighter by about 1 bp on the mid to long end of the curve, a bond source said.

"It was a quiet day with Quebec and Ontario coming earlier in the week," the source said.

In other activity, new details were released on the offering from Ford Credit Canada Ltd.

Government bonds dipped, sending yields up across the curve. The 10-year note yield rose 4 bps to 2.29%. The 30-year bond yield closed up 3 bps to 2.91%.

Canada Housing Trust on tap

Canada Housing Trust (Aaa/AAA/DBRS: AAA) is expected to price C$5 billion to C$6 billion of new five-year Canada mortgage bonds the week of Sept. 19, a bond source said Thursday.

The regular quarterly issue typically prices in September. The trust is expected to bring one tranche of bonds due December 2016.

Other sale details have not been finalized.

Canada Housing Trust is a unit of Canada Mortgage and Housing Corp., which offers financing, mortgage loan insurance and mortgage-backed securities.

British Columbia prices

The Province of British Columbia sold $750 million of 2.65% 10-year bonds, series BCUSG-6, on Thursday at a spread of mid-swaps plus 40 bps, or Treasuries plus 57.95 bps, according to an FWP filing with the Securities and Exchange Commission.

The bonds (Aaa/AAA/AAA) were priced at 99.983 to yield 2.652%.

The bonds are non-callable.

Bank of America Merrill Lynch, CIBC World Markets Corp., HSBC Securities (USA) Inc. and RBC Capital Markets Corp. were the bookrunners.

Co-managers were National Bank Financial Inc., Scotia Capital USA Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., BMO Capital Markets Corp. and TD Securities (USA) LLC.

In the secondary market, the bonds were seen moderately tighter at 56 bps bid, a trader said.

The issuer is based in Victoria, B.C.

Ford Auto Trust sells ABS

Details were released Thursday on the high-grade offering from Ford Credit Canada, which sold C$534.61 of asset-backed notes through the Ford Auto Securitization Trust.

The first tranche of C$172 million of 1.714% series 2011R2 class A1 notes (Aaa/DBRS: AAA) due Aug. 15, 2013 priced at par to yield 1.708%, or a spread of 78 bps over the Canadian bond curve.

The second tranche of C$206 million of 1.968% series 2011R3 class A2 notes (DBRS: AAA) due July 5, 2015 were sold at par to yield 1.96%, or a spread of 102 bps over the curve.

The third tranche of C$119.93 million of 2.482% series 2011R2 class A3 notes (DBRS: AAA) due Nov. 15, 2016 were sold at par to yield 2.495%. The notes priced at a spread of 130 bps over the curve.

The trust also offered lower-rated smaller tranches that includes C$15.72 million of series 2011R3 class B notes due March 15, 2017 (DBRS: AA); C$10.48 million of series 2011R3 class C notes (DBRS: A) due June 15, 2017 and C$10.48 million of series 2011R3 class D notes (DBRS: BBB) due March 15, 2018.

CIBC World Markets Inc., HSBC Securities (Canada) Inc., RBC Capital Markets Corp., BMO Capital Markets Corp. and TD Securities Inc. were the managers.

Ford Motor Co. is the performance guarantor.

Proceeds will be used to finance the purchase of retail conditional sale contracts secured by new and used vehicles.

The issuer is the Canadian finance arm of the Ford Motor Co.

Andrea Heisinger contributed to this review

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