British Columbia taps euro market; Home Capital to sell five-years; Manitoba bonds firm

By Cristal Cody

Prospect News, April 21 - The Canadian bond markets were largely quiet on Thursday as traders began heading out early ahead of the three-day holiday weekend. Activity is expected to stay light through Tuesday.

The markets will be closed on Friday.

The market was "pretty much unchanged on the day," one source said, noting "not much in terms of secondary activity. A lot of clients are off today and tomorrow and Monday as well. We expect things to be relatively quiet until Tuesday of next week."

In one new deal brought on Wednesday, the Province of British Columbia sold C$100 million of 2.875% notes due April 2016 at 100.978, an informed source said Thursday.

"Haven't seen a euro deal done in a long time. There could be some other provinces doing the same, if the demand was there," the source said. "They saved a couple basis points by issuing in Canada."

The dollar-denominated deal brought on Tuesday by the Province of Manitoba traded 3 basis points to 4 bps tighter on Thursday, according to a source.

In new corporate supply, one new deal was announced on Thursday from Home Capital Group Inc., which plans to sell up to C$150 million of debentures due 2016.

Canada's high-yield bond market was mostly unchanged on Thursday, with Newalta Corp.'s 7.625% senior notes due 2017 trading flat, a source said.

Canadian government bonds rose on the day, sending yields down. Canada's 10-year bond yield fell to 3.291% from 3.33%. The 30-year bond yield dropped to 3.738% from 3.76%.

Treasuries were mixed on light trading volume ahead of the long holiday weekend. The 10-year benchmark note yield fell 1 bp to 3.4%, while the 30-year bond yield rose 1 bp to 4.47%.

"Volume is really anemic," said Guy LeBas, chief fixed income strategist with Janney Montgomery Scott in Philadelphia. "Phones are quiet. It's been about 60% of the usual volume thus far in the day, and that's going to start dropping real fast."

British Columbia prices

In Wednesday issuance, the Province of British Columbia sold C$100 million of 2.875% notes due April 2016 at 100.978, an informed source said.

The notes (Aaa/AAA) were sold in Europe as part of the province's euro debt issuance program.

TD Securities Inc. was the lead manager.

Home Capital on tap

Home Capital Group said in a statement on Thursday that it plans to sell up to C$150 million of debentures due 2016.

Scotia Capital Inc. is the lead manager.

The offering is expected to close around May 2.

The proceeds will be used to provide additional capital to Home Trust Co., a subsidiary of Home Capital, to meet regulatory requirements for its further growth, and the balance will be used for general corporate purposes.

Home Capital Group is a Toronto-based mortgage lender and credit services provider.

Manitoba notes firm

In the dollar-denominated deal on Tuesday, the Province of Manitoba sold $750 million of 1.375% three-year global bonds at a spread of mid-swaps plus 5 bps, or Treasuries plus 28.25 bps, an informed source said.

The bonds (Aa1/AA) are now at mid-swaps plus 1 bp, "so it's cranked in a good 3 to 4 bps," the source said.

While much of the interest likely is from U.S. investors, a percentage of the bonds were sold to European and Asian central banks, according to the source.

"We figure there's a lot of interest in the U.S.; we just had better distribution overseas," the source said.

Proceeds are going toward funding advances to Manitoba Hydro-Electric and for general corporate purposes.

The issuer is based in Winnipeg, Man.

Newalta flat

Some activity was seen in Newalta's 7.625% senior notes due 2017, but the bonds still traded early Thursday unchanged at 106 bid, 107 offered, a high-yield bond source said.

The company sold the notes on Nov. 18 at par.

Newalta is a Calgary, Alta.-based industrial waste management and environmental services company.

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