British Columbia, Manitoba tap market; corporate bonds quiet; government bonds end weaker

By Rebecca Melvin

New York, May 29 - The Province of British Columbia issued a total of C$700 million of 10-year and long bonds on Tuesday, and the Province of Manitoba issued a C$300 million long bond.

The provincial and corporate primary markets have been fairly active in recent weeks. But contrary to the recent trend, the corporate bond market was quiet on Tuesday, with market sources saying that bond market ranks were thinned by vacation schedules and many players remained out following the U.S. Memorial Day holiday.

The U.S. markets were closed on Monday for the Memorial Day holiday.

"There was nothing noteworthy," a market source said of the Canadian market Tuesday. "A lot of people take the U.S. holiday off and haven't gotten back yet."

Government bonds were stronger earlier in the day but finished weaker.

"Bonds ended weaker, with yields at the long end up 2 to 3 basis points, and a little more at the middle of the curve," a market source said.

Yields were up 5 bps to 7 bps in the middle of the curve.

The weakness was attributed to a rebound in equity markets as the situation in Europe remains very fluid.

There was nothing positive in Europe that would have supported equity, and weaker U.S. consumer confidence would have supported the bond market. So I can't really explain why the bond market is weaker," a market source said.

Last week, the Canadian bond market was overstretched and the market was pricing in rate cuts that are now viewed as unlikely, a second market source said.

Canadian government bonds traded weaker on Monday, turning lower after initial strength as equity markets gained. Canada's two year bond gained 7 bps to yield 1.17%; the 10-year note yield was up 3 bps to 1.87%, and the 30-year bond yield fell 1.5 bps to 2.39%.

British Columbia prices

The Province of British Columbia priced C$500 million of a new 10-year benchmark and reopened its long benchmark for C$200 million early Tuesday. A new 10-year benchmark has been anticipated for some time, according to a syndicate source. While the issuer took advantage of the low-rate environment and investor demand ahead of the June 1 coupon date to add to their existing 2042 bonds.

Both tranches were well received by investors and sold quickly with a few chunky orders in the 10-year tranche.

British Columbia last reopened its long benchmark on Dec. 14, 2011. Total outstanding on the long bond now stands at C$3.45 billion. With the completion of these transactions, British Columbia has now completed about 35% of its long-term 2012-2013 fiscal year borrowing requirements.

The C$500 million of new 2.7% 10-year bonds, which mature Dec. 18, 2022, were sold at 99.582 for a yield of 2.746%, providing a spread of 91 bps over the Canada benchmark, a 2.75% bond due 2022.

The C$200 million of 4.3% long bonds due June 18, 2042 was a reopening sold at 118.393 for a yield of 3.327%, providing a spread of 95.5 bps over the Canada benchmark. That issue now has a total outstanding of C$3.65 billion.

BMO Capital Markets Corp. was the lead bookrunner, with TD Securities (USA) LLC and CIBC World Markets Corp. as co-lead bookrunners.

Manitoba sells C$300 million

With the proceeds of Manitoba's new issue, the province has now completed about 38% of its long-term 2012-2013 borrowing requirements.

Manitoba sold C$300 million of 3.35% 30-year bonds at a spread of 99 bps over the Canadian 4% due June 2041 benchmark, on Tuesday, according to a syndicate source.

The deal, which followed on the heels of British Columbia's successful dual-tranche offering, sold very quickly, according to syndicate sources.

The debentures due March 5, 2043 (Aa1/AA) priced at 99.501 to yield 3.376%.

BMO Capital Markets Corp. was the lead manager with CIBC World Markets Inc. and RBC Capital Markets Corp. as co-leads.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.