Canadian bond market activity slows; Equitable Group sells C$20 million 10-year debentures

By Cristal Cody

Prospect News, Dec. 20 - The Canadian bond markets slowed on Monday, with one sale of C$20 million of debentures announced by Equitable Group Inc.

No major offerings are expected during the holiday week. The U.S. bond markets will close early on Thursday and will be closed Friday for the Christmas Day holiday.

Canadian bond markets will close early on Friday and be closed Monday and Tuesday for the holidays.

Government bonds on the front end outperformed U.S. Treasuries on light trading volume, said Kam Bath, a fixed income strategist with RBC Capital Markets Corp.

"We had softer-than-expected wholesale sales data; it did help the 10s and fives outperform the U.S.," he said. "Given the holiday season, it doesn't take much to swing things around a bit. There's no supply either in Canada or the U.S. this week."

The Canadian 10-year bond yield fell to 3.163% from 3.17%. The two-year note yield fell to 1.63% from 1.64%.

Statistics Canada said Monday that wholesale sales were flat in October at C$44.9 billion after a rise of 0.7% in September.

U.S. Treasuries rose earlier on Monday but ended the day flat on extremely light holiday trading following another two sets of bond buybacks by the Federal Reserve.

The yield on the 10-year was unchanged at 3.33%. The two-year note fell 1 basis point to 0.6%.

The Federal Reserve Bank of New York bought $7.79 billion of Treasuries due 2018 through 2020 early Monday as part of its $600 billion asset buyback program to stimulate the economy. In the second purchase on Monday, the Federal Reserve purchased $6.779 billion of two-year to four-year Treasuries.

Equitable sells C$20 million

Equitable Group sold C$20 million of 6.092% 10-year fixed-to-floating-rate series 9 debentures on Monday, according to a company statement.

The debentures priced at a spread of 350 basis points over the five-year Government of Canada bond benchmark.

The debentures have a 10-year term and will pay fixed interest monthly for the first five years and then switch to a floating interest rate equal to the 90-day CDOR plus 338 bps.

The company said in the statement that the sale offers the ability to extend the average term of its subordinated debt at a lower average interest cost.

The proceeds from the sale will be used to purchase subordinated debt of Equitable Trust, which qualifies as Tier 2B regulatory capital, and will in turn be used to retire the series 6 6.92% debentures.

Equitable Group is a Toronto-based mortgage lender with a focus on service in Ontario, Alberta and Manitoba.

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