Deal activity continues with Quebec add-on; National Bank of Canada, Norbord up in trading

By Cristal Cody

Prospect News, June 20 - Primary activity continued on Wednesday in Canada's bond markets with a C$500 million add-on from the Province of Quebec, while bonds closed stronger going out on more positive tone following the Federal Reserve's announcement of additional monetary policy.

Quebec reopened its 3.5% 10-year medium-term notes a day after Prince Edward Island raised C$200 million in an offering of 30-year bonds.

Issuance remains quiet in the corporate sectors after companies such as Bell Canada and Canadian Natural Resources Ltd. tapped the Canadian bond markets the previous week.

Corporate bonds ended better after the "rollercoaster" day, a trader said.

"It's been all over the place. Everyone was waiting to see what the Fed did," the trader said.

The Markit CDX Series 18 North American investment-grade index firmed 1 basis point to a spread of 114 bps.

National Bank of Canada's 1.5% senior notes due 2015, which priced on Tuesday, tightened 5 bps in the secondary market on Wednesday, a trader said.

No trading activity was seen over the day in Hydro-Quebec's 1.375% global notes due 2017 sold on June 12. Quebec government-owned electric power generator and distributor Hydro-Quebec (Aa2/A+/DBRS: A) priced a $1 billion U.S.-dollar denominated offering of the notes at a spread of 35 bps over mid-swaps, or 64.65 bps over Treasuries.

In the high-yield secondary market, Norbord Inc.'s 6¼% three-year senior secured notes are up more than 2 points since the notes priced earlier in the month.

Government bonds ended mostly weaker except on the longer end after the Federal Reserve's extension of its Operation Twist bond program through the end of the year.

Canada's two-year note yield rose 4 bps to 1.09%, while the 30-year bond yield closed unchanged at 2.36%.

Quebec sells C$500 million

In the domestic market, the Province of Quebec sold C$500 million in a reopening of its 3.5% medium-term notes due Dec. 1, 2022 at 104.769 to yield 2.965% on Wednesday, a bond source said.

The notes priced at a spread of 116 bps over the Government of Canada benchmark.

National Bank Financial Inc. and BMO Capital Markets Corp. were the lead managers.

Co-managers included Casgrain & Co. Ltd., CIBC World Markets Inc., Desjardins Securities Inc., Laurentian Bank Securities, Inc., Merrill Lynch Canada Inc., RBC Capital Markets Corp., Scotia Capital Inc. and TD Securities Inc.

The province was in the market earlier in the month with a reopening of the issue, first priced on Nov. 29, 2011 at a spread of 115 bps over the Government of Canada benchmark.

On June 7, Quebec sold C$500 million in an add-on to the notes at a spread of 116.5 bps over the Canadian government benchmark. The total outstanding is C$5 billion.

National Bank of Canada firms

In secondary trading, National Bank of Canada's 1.5% senior notes due 2015 tightened, going out on Wednesday at 115 bps bid, 105 bps offered, a trader said.

The Canadian bank priced a U.S. dollar-denominated $1 billion offering of the three-year senior notes (Aa2/A/) on Tuesday at a spread of Treasuries plus 120 bps.

The financial services company is based in Montreal.

Norbord stronger

Norbord's 6¼% senior secured notes due June 15, 2015 were quoted early in the day higher at 102.25 bid, 104.25 offered, a trader said on Wednesday.

The company sold $165 million of the notes (Ba2/BB-/DBRS: BB) in a U.S. dollar-denominated offering at par on June 7.

The Toronto-based company manufactures wood panels.

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