Hydro-Quebec, Export Development plan U.S. dollar deals; banks firm, Kinross Gold widens

By Cristal Cody

Prospect News, June 11 - European and U.S. bond markets saw heavier issuance on Monday, while domestic primary activity stayed quiet with two Canadian issuers planning U.S. dollar deals.

"Nothing today," one Canadian bond source said. "Just Hydro-Quebec is expected in the U.S. dollar market, as well as Export Development Canada."

Export Development Canada plans to sell $1 billion of three-year bonds and Hydro-Quebec intends to price five-year notes in the U.S. market on Tuesday, according to informed bond sources.

The market tone improved early Monday after Europe offered to lend Spain up to $125 billion to help its banking sector. Deal activity is expected to be quiet in the latter part of the week ahead of Sunday's Greek election that could determine whether Greece continues to use the euro currency.

The primary calendar in Canada is light for the week "other than the CMB deal expected to launch tomorrow and price on Wednesday," a bond source said.

Canada Housing Trust (Aaa/AAA/DBRS: AAA) plans to reopen its 2.05% Canada Mortgage Bonds due June 15, 2017 in an offering forecast at C$5 billion to C$5.5 billion.

The trust, part of Canada Mortgage and Housing Corp., which provides financing and mortgage loan insurance among other programs, first sold the issue on March 15. The trust priced C$5 billion of the series 46 five-year bonds at a spread of 39 basis points over the Government of Canada benchmark.

Corporate bonds started the day slightly tighter but traded wider going out. The Markit CDX Series 18 North American investment-grade index closed 4 bps wider from Friday's level at a spread of 125 bps.

Canadian bank and financial paper traded stronger on Monday from the previous week. Bank of Nova Scotia's three-year notes came in 9 bps and its five-year notes firmed 4 bps.

Bank of Montreal's 2.5% notes due 2017 (Aa2/A+) also were 4 bps better at 109 bps on the day.

In other trading, Kinross Gold Corp.'s bonds have widened nearly 30 bps to 50 bps since Thursday, a source said.

Government bonds ended the day better on concerns and questions over Spain's bank bailout and the upcoming Greek election on Sunday. The yield on Canada's 10-year note dropped to 1.76% from 1.81%. The 30-year bond yield fell 3 bps to close at 2.34%.

Hydro-Quebec plans U.S. deal

Hydro-Quebec (Aa2/A+/DBRS: A) is expected to bring a U.S.-dollar denominated benchmark offering of five-year notes, a bond source said on Monday.

The notes are talked at mid-swaps plus a spread in the low to mid 30 basis points and pricing is expected on Tuesday.

Bank of America Merrill Lynch, CIBC World Markets Inc., HSBC Securities and RBC Capital Markets LLC are the lead managers.

Hydro-Quebec was in the U.S. market on June 23, 2011 with a $1 billion offering of 2% global five-year notes (Aa2/A+/) that priced at mid-swaps plus 22 bps, or Treasuries plus 55.7 bps.

Hydro-Quebec is a Quebec government-owned electric power generator and distributor.

Export Development Canada to sell $1 billion

Export Development Canada is planning a $1 billion sale of three-year notes in the U.S. market, a source away from the trade said on Monday.

The notes (Aaa/AAA/) are expected to price on Tuesday.

Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC and TD Securities (USA) LLC are bookrunners.

The government-backed agency for exporters is based in Ottawa.

Scotiabank tightens

In the secondary market, Bank of Nova Scotia's paper (Aa1/AA-/) traded better, a source said on Monday.

Scotiabank's 1.85% senior notes due 2015 firmed 9 bps in trading since Thursday to a spread of 67 bps on Monday, a bond source said.

The bank sold $1 billion of the notes Jan. 5 at a spread of 147 bps over Treasuries.

Bank of Nova Scotia's other tranche of 2.55% notes due 2017 that also priced on Jan. 5 traded better by 4 bps, going out at 94 bps.

The bank sold $1.25 billion of the five-year tranche at Treasuries plus 172 bps.

The Canadian bank is based in Halifax, N.S.

Kinross Gold widens

Kinross Gold's 5.125% notes due 2021 (Baa3/BBB-/) moved out in trading to 330 bps on Monday from a spread of 282 bps on Thursday, a bond source said.

The company's 6.875% bonds due 2041 widening to 377 bps from 347 bps in Thursday's secondary session.

Kinross Gold sold both tranches on Aug. 15. The $500 million offering of notes due 2021 priced at a spread of 290 bps over Treasuries. The $250 million tranche of long bonds priced at a spread of 315 bps plus Treasuries.

The mining and gold ore processing company is based in Toronto.

Andrea Heisinger contributed to this review

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