Canadian bonds: Bonds fall on bank rate hike; Bell Aliant sells C$350 million in notes

By Cristal Cody

Tupelo, Miss., Sept. 8 - Canadian bonds underperformed U.S. Treasuries in the wake of the Bank of Canada's decision to raise interest rates by 25 basis points to an overnight rate of 1% on Wednesday.

The yield on Canada's two-year bond rose to 1.40% from 1.28% the previous day. The yield on the 10-year bond was seen up at 2.92% from 2.81%.

In a statement, the Bank of Canada said other solutions may be taken, including additional rate hikes.

"We saw a bigger sell-off in Canada over the U.S. largely because of the rate increase by the Bank of Canada and the relatively hawkish language in the press release," said Douglas Porter, BMO Capital Markets Corp.'s deputy chief economist. "It wasn't a massive underperformance by Canadian bonds, but clearly a relative weakening in Canada."

Canada's 10-year note yield rose more than 10 bps, while the comparable move with the U.S. 10-year Treasury note was a rise of 6 bps.

"The real gap was at the short end," Porter said. "The two-year yield in Canada jumped 13 basis points versus 3 to 4 basis points move in the U.S."

In Canada's corporate bond market, Bell Aliant Regional Communications, LP priced C$350 million of medium-term notes due Sept. 13, 2017, according to sources.

The notes carry a 4.37% coupon, the company said in a statement.

The sale will close on Monday.

CIBC World Markets Inc., RBC Capital Markets Corp. and TD Securities Inc. were lead managers for the offering.

The proceeds will be used to make a partial redemption of the 4.72% medium-term notes due Sept. 26, 2011 and for working capital and general corporate purposes.

The Halifax, N.S.-based company is a telephone and internet provider for Canadian provinces.

Also in the market on Wednesday, the Province of Ontario priced $1.25 billion of 1.875% five-year global notes to yield 44.7 bps over Treasuries or mid-swaps plus 25 bps, according to an FWP filing with the Securities and Exchange Commission.

The notes (Aa1/AA-/) priced at 99.962 to yield 1.883%. They are non-callable.

© 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.