Provincial, corporate deals hit market one day after Bank of Canada keeps rates in check

By Cristal Cody

Prospect News, Oct. 20 - A slew of new provincial and corporate deals priced on Wednesday from the provinces of Quebec and Manitoba, the Canadian Imperial Bank of Commerce and Brookfield Asset Management Inc., a day after the Bank of Canada held the overnight interest rate unchanged, sources said.

"All the deals went well," according to one source. "There's a lack of product on the Street, so all new issues priced reasonably are getting swallowed up."

October has been fairly quiet in new issues during earnings season and as the market waited for the Bank of Canada's decision. The Bank of Canada on Tuesday kept the benchmark overnight rate at 1% after three previous increases of 25 basis points each.

"There were a lot of uncertainties," one source said. "They waited until the Bank of Canada came out."

Secondary market focus on Wednesday was limited to mostly new issues, according to sources.

In the largest deal of the day, Canadian Imperial Bank of Commerce sold C$1.5 billion 3.15% 10-year debentures, sources said.

The debentures were priced at a spread of 134 bps over the Canadian benchmark bond to yield 3.196%.

CIBC World Markets Inc. was the lead bookrunner.

The debentures may be redeemed at CIBC's option at par on or after Nov. 2, 2015.

Meanwhile, Export Development Canada sold $1 billion of 1.25% five-year global bonds on Wednesday to yield Treasuries plus 21.2 bps, a syndicate source away from the sale said.

The bonds were talked in the area of mid-swaps minus 3 bps, a source said early in the day.

The bonds (Aaa/AAA) priced at 99.85 to yield 1.281%. They are non-callable and guaranteed by the government of Canada.

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

Proceeds will be used for general corporate purposes.

The issuer provides funding for the export industry in Canada and is based in Ottawa.

Government bonds weaken

Canadian government bonds fell on the day, sending yields up. Canada's 10-year bond yield rose 3 bps to 2.74%.

Canada's Monetary Policy Report had little impact on traders.

"Basically the Bank of Canada is on hold for the next half year or so, so it doesn't matter what the economic stats are right now," a source said.

U.S. Treasuries rallied early in the day but started to drag late afternoon, sending yields rising as the market digested the Federal Reserve's Beige Book data from Fed branches.

The yield on the Treasury's 10-year benchmark note ended the day unchanged at 2.48%. The two-year note yield eased 1 bp to 0.35%. The 30-year bond yield fell 2 bps to 3.89%.

Brookfield, First Capital sell debt

Elsewhere, Brookfield Asset Management sold C$350 million in 5.3% senior unsecured notes due March 1, 2021, a source said.

The notes (Baa2/A-/BBB/) priced at 250 bps over the Canadian benchmark to yield 5.307%.

CIBC World Markets Inc., RBC Capital Markets Corp. and TD Securities Inc. were the lead bookrunners.

The proceeds will be used to refinance existing debt and for general corporate purposes.

Toronto-based Brookfield manages more than $100 billion in property, power and infrastructure assets.

Also, First Capital Realty Inc. sold C$50 million in a reopening of its 4.95% series K senior unsecured debentures on Wednesday, sources said.

The company sold the debentures (DBRS: BBB/Baa3) due Nov. 30, 2018 at 100.351, or a spread of 240 bps over the Canadian benchmark bond, to yield 4.897%.

RBC Capital Markets Corp. was the lead bookrunner.

The debt originally was sold on Aug. 25, 2010. The series has C$100 million outstanding.

Proceeds will be used to develop assets and for general corporate purposes.

Toronto-based First Capital Realty is a leading owner, developer and operator of supermarket and drugstore-anchored shopping centers in Canada.

Provinces see demand

Several provinces reopened or sold debt to good demand, according to sources.

The Alberta Capital Finance Authority sold an upsized C$500 million in 2.5-year floating-rate notes on Wednesday.

The deal was upsized from C$400 million, a source said.

The notes due April 2013 priced at the three-month Canadian dealer offered rate plus 7 bps.

The ACFA provides funding for local authorities within Alberta to fund capital projects.

Also on Wednesday, the Province of Quebec sold C$500 million in a reopening of its 4.5% 10-year bonds, according to a source.

The bonds priced at a spread of 82 bps over the Canadian government benchmark to yield 3.55%.

In addition, the Province of Manitoba sold C$250 million in a reopening of its 4.15% 10-year bonds on Wednesday, a source said.

The bonds priced at a spread of 66 bps over the Canadian government benchmark to yield 3.397%.

Andrea Heisinger contributed to this report

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