Markets quiet on light secondary trade; fiscal cliff to shape Canada's January deal calendar

By Cristal Cody

Prospect News, Dec. 24 - Canadian secondary markets saw slight activity on Monday, but otherwise the short session ended mostly quiet with offices closed ahead of the Christmas holiday, bond sources said.

"Somebody just had to be here to answer the phones and I drew the short straw," one bond source said. "There's a little bit of secondary activity, but really nothing, zero."

The Canadian bond markets closed early on Monday and will be closed on Tuesday for Christmas Day and on Wednesday for Boxing Day.

Light activity is expected for the remainder of the year with books closed and the focus on whether U.S. lawmakers will reach a resolution to prevent $600 billion in spending cuts and tax hikes set to take effect after December, sources said.

Canada's primary calendar should be busy in January, but the pipeline may depend on whether the United States resolves the fiscal cliff situation, sources said.

"The fiscal cliff - it looks like they're going to go over it," a syndicate source said. "I don't think the market will shut down. There seems to be a belief that there will probably be a resolution in the new year, but it will affect spreads. The market will still be open, but it depends on whether issuers will come at wider spreads or wait until there's a resolution."

Looking ahead to the new year, bond deals are expected from Enbridge Gas Distribution Inc. and Dundee International Real Estate Investment Trust, which filed preliminary base shelf prospectuses late in December.

Enbridge (/A-/DBRS: A) filed a prospectus on Friday with Canadian regulators to offer up to C$800 million of medium-term notes over the next year.

Dundee REIT filed a prospectus to offer up to C$1 billion of units and debt securities over the next 25 months.

In the secondary market, Fairfax Financial Holding Ltd.'s 5.84% senior notes due 2022 are trading higher since the notes priced in October.

The Markit CDX Series 18 North American investment-grade index ended the day flat at a spread of 93 basis points.

The Markit CDX Series 18 North American high-yield index dropped to 101.05 from 101.12.

Provincial bonds were mixed in light trading, a market source said. The Province of Ontario's 1.9% notes due Sept. 8, 2017 that reopened earlier in December traded unchanged on the day.

Canadian government bonds edged lower. Canada's 10-year note yield rose 1 bp to 1.81%. The 30-year bond yield closed unchanged at 2.37%.

Fairfax Financial rises

Fairfax Financial's 5.84% senior notes due 2022 inched up to 105.75 going out on Monday, a source said.

The company sold C$200 million of the senior notes (Baa3/BBB-/DBRS: BBB) on Oct. 11 at 99.963 to yield a spread of 403.9 bps over the Government of Canada benchmark.

Toronto-based Fairfax Financial is a financial services holding company that owns property and casualty insurance and reinsurance and investment management subsidiaries.

Ontario unchanged

The Province of Ontario's 1.9% notes due Sept. 8, 2017 traded unchanged on the day at 100.36 to yield 1.82%, a market source said.

The province (Aa2/AA-/DBRS: AA) sold C$1 billion in an add-on to the five-year notes on Dec. 4 at 100.176 to yield 1.861%.

The province first sold the issue on Jan. 17, 2012 in a C$1.25 billion offering at 99.744 to yield 1.948%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.