Canada Housing to sell C$5 billion; primary action stays light; Millar Western cheapens

By Cristal Cody

Prospect News, March 14 - Canada Housing Trust launched C$5 billion of five-year Canada Mortgage Bonds on Wednesday, with pricing expected on Thursday, according to sources.

Light primary activity is expected for the remainder of the week due to the school holiday in many provinces.

More issuance in the Canadian telecom sector looks promising after Canada on Wednesday said it will amend the Telecommunications Act to lift foreign investment restrictions for telecom companies that hold less than a 10% share of the total Canadian telecommunications market, as syndicate sources previously told Prospect News.

In addition, Canada plans to auction wireless spectrum band in 2013 to bring more mobile networks, Industry Canada minister Christian Paradis said in a statement.

Sources said in December that telecom merger activity in the upcoming year likely will create new bond offerings.

Corporate bonds traded mostly better over the day.

The Markit CDX Series 17 North American investment-grade index firmed 1 basis point to a spread of 91 bps.

"Trading activity is very slow," a source said. "We have a March break this week so a lot of people are away."

Canadian lumber company Millar Western Forest Products Ltd.'s 8½% notes due 2021 (B3/B-) priced a year ago in the U.S. market are trading at an attractive cheaper price, a source said on Wednesday.

Government bond traded lower as investors moved into riskier assets in continued response to the Federal Reserve's better economic outlook and after the Fed released a report late Tuesday that the largest U.S. banks passed the annual stress test.

Canada's 10-year note yield rose 4 bps to 2.15%, and the 30-year bond yield rose to 2.7% from 2.66%. U.S. Treasuries plunged on the day with yields up 15 bps on the 10-year note.

"The Treasury curve definitely steepened today and the yield has picked up here on Government of Canada bonds," a source said.

Canada Housing sets talk

Canada Housing Trust (Aaa/AAA/DBRS: AAA) launched C$5 billion of five-year Canada Mortgage Bonds on Wednesday, a bond source said.

The series 46 bonds due June 15, 2017 are talked at 37.5 bps over the Government of Canada benchmark. The deal is Rule 144A eligible.

Lead managers are TD Securities Inc., BMO Capital Markets Corp., RBC Capital Markets Corp. and Merrill Lynch Canada Inc.

Co-managers are CIBC World Markets Inc.; National Bank Financial Inc.; Scotia Capital Inc.; DBS; Desjardins Securities Inc.; HSBC Capital (Canada) Inc.; Casgrain & Co. Ltd. and Laurentian Bank Securities, Inc.

Pricing is expected on Thursday.

The trust is a unit of Canada Mortgage and Housing Corp., which provides financing, mortgage loan insurance, mortgage-backed securities and housing policy and programs.

Millar Western cheap

In the secondary market, Millar Western's 8½% senior notes due 2021 are trading at 81 bid, a source said on Wednesday.

Millar Western sold $210 million of the 10-year senior notes (B3/B-/) at par to yield 8½% in the U.S. high-yield market on March 31, 2011.

Privately held Edmonton, Alta.-based Millar Western produces and markets lumber and pulp products.

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