Canadian issuers flood bond markets; more than C$18 billion sold; BMO offers deposit notes

By Cristal Cody

Prospect News, Oct. 12 - Canadian issuers tapped the Canadian and U.S. bond markets on Wednesday in a flood of new deals, including a corporate deal from AltaGas Ltd. and provincial sales from the provinces of British Columbia, Quebec and Ontario.

In addition, late afternoon, Bank of Montreal launched a C$500 million offering of deposit notes due 2016 "with room to grow" at 125 basis points, plus or minus 3 bps, a source said.

The books were expected to close late afternoon. Final pricing terms were not immediately available.

In the U.S. bond markets, National Bank of Canada brought $1.4 billion of 2.2% five-year covered bonds, while Toronto Dominion Bank sold $1.5 billion of 2.375% five-year senior medium-term notes on Wednesday.

"Deal-o-rama today," one bond source said. "Things are stable and spreads are coming in. The backup we've seen in all-in yields has brought in some investor interest as well. Yields are starting to look a little more attractive for investors now."

The Markit CDX Series 17 North American high-grade index firmed 5 bps to a spread of 130 bps on Wednesday.

Government bonds ended lower across the curve as confidence grew that Europe will avoid a debt default. Canada's 10-year note yield rose 2 bps to 2.35%. The 30-year bond yield closed up at 2.94% from 2.87%.

Ontario prices C$750 million

The Province of Ontario (Aa1/AA-/DBRS: AA) was first in the Canadian bond markets on Wednesday with a sale of C$750 million in a reopening of its 4.65% benchmark bonds due June 2, 2041 at 114.273 to yield 3.839%, a bond source said.

The bonds priced at a spread of 98.5 bps over the Government of Canada benchmark.

RBC Capital Markets Corp. was the lead manager.

The province last reopened the issue on Sept. 9 in a sale of C$750 million priced at 114.18 to yield 3.845%, or a spread of 92 bps over the Government of Canada benchmark.

British Columbia sells notes

The Province of British Columbia (Aaa/DBRS: AA) also came with C$600 million in a reopening of the 3.25% 10-year notes at 100.198 to yield 3.227% on Wednesday, a bond source said.

The bonds due Dec. 18, 2021 priced at a spread of 86.5 bps over the Government of Canada benchmark.

RBC Capital Markets was the bookrunner.

The province first priced the issue on Aug. 17 in a C$500 million offering sold at 99.751 to yield 3.279%, or a spread of 83 bps over the Canadian government benchmark.

Quebec sells C$300 million

Meanwhile, the Province of Quebec (Aa2/A+/DBRS: A) sold C$300 million in a reopening of its 4.5% notes due Dec. 1, 2020 at 109.888 to yield 3.239% on Wednesday, an informed source said.

The notes priced at a spread of 98 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

The issue now has a total of C$5.3 billion outstanding.

AltaGas sells notes due 2019

On the corporate side, AltaGas sold C$200 million of 4.55% senior medium-term notes due Jan. 17, 2019 at 99.994 to yield 4.552% on Wednesday, bond sources said.

The notes (/BBB/DBRS: BBB) were priced at a spread of 252 bps over the Canadian bond curve, tighter than price talk. The deal was launched at 255 bps, plus or minus 3 bps.

TD Securities Inc. and BMO Capital Markets Corp. were the lead managers.

Proceeds will be used to reduce outstanding debt and for general corporate purposes.

AltaGas is an energy company based in Calgary, Alta.

National Bank of Canada prices

In the U.S. market, the National Bank of Canada sold $1.4 billion of 2.2% five-year covered bonds on Wednesday to yield Treasuries plus 104.5 bps, an informed source said.

The bonds (Aaa/AAA/AAA) were priced at 99.948 to yield 2.211%.

The bonds were offered under Rule 144A and Regulation S.

Barclays Capital Inc., Citigroup Global Markets Inc., National Bank Financial and RBC Capital Markets LLC were the bookrunners.

The financial services company is based in Montreal.

TD Bank sells five-year notes

Also, Toronto-Dominion Bank sold $1.5 billion of 2.375% five-year senior medium-term notes, series A, on Wednesday to yield 135 bps over Treasuries, a market source said.

The notes (Aaa/AA-) were priced at 99.444 to yield 2.494%.

The notes are non-callable.

Bookrunners were TD Securities (USA) LLC, J.P. Morgan Securities LLC, Citigroup and Goldman Sachs & Co.

Proceeds will be added to general funds and used for general corporate purposes.

TD Bank last priced paper in a $5 billion sale of covered bonds in three- and five-year maturities on Sept. 7. The 1.625% five-year bonds from that sale were priced at mid-swaps plus 44 bps or Treasuries plus 73.4 bps.

The bank and financial services company is based in Toronto.

Andrea Heisinger contributed to this review

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