NAV Canada, Canadian Capital Auto II tap market; British Columbia debt expected to grow

By Cristal Cody

Prospect News, Feb. 15 - Canadian Capital Auto Receivables Asset Trust II completed the sale of its deal announced the previous day, upping the size to C$744.6 million in five tranches of asset-backed notes.

Also in the Canadian bond markets on Tuesday, NAV Canada sold C$250 million of general obligation notes.

No provincial sales were expected until Canada Mortgage and Housing Corp. brings its deal on Wednesday, a source said. The Canada Mortgage and Housing offering includes a new issue of fixed-rate notes due June 2021. The tranche is pegged at C$2 billion to C$2.5 billion and talked at 27.5 basis points to 28 bps over the Canadian bond curve.

The second tranche is talked at C$1 billion in a reopening of the March 2016 floating-rate notes.

Canada Mortgage and Housing offers financing, mortgage loan insurance, mortgage-backed securities and other programs.

In provincial markets, British Columbia set the new 2011/2012 fiscal year C$41.9 billion budget on Tuesday with debt expected to rise to C$53.4 billion, up from C$47.2 billion in the previous budget. Total provincial debt is expected to rise to C$57.6 billion in 2012/2013 and to C$57.6 billion in 2013/2014.

British Columbia has about C$1.3 billion left to borrow through the remainder of the current fiscal year, which ends March 31, a source said.

The Province of Ontario is expected to be in the market soon with an offering of 10-year and 30-year debt, a source said.

"Alberta has their budget on the 24th, so they're probably out of the market [for awhile]," the source said. "The only other issuer would be Ontario, and on Friday they issued a new five-year deal for C$1 billion, which took care of the remaining borrowing they had to do. But they're currently in refunding mode, so we could see them in March with a 10-year or a 30-year this week or next week."

Government bonds edge higher

Canadian government bonds were slightly higher on Tuesday after the Bank of Canada buyback of C$1 billion of bonds and on lower U.S. retail sales data.

Canada's 10-year note yield fell to 3.477% from 3.51%. The two-year note yield fell to 1.921% from 1.95%.

In Canadian economic data, Statistics Canada said that the composite price index of non-residential building construction rose 0.4% in the fourth quarter compared with the previous quarter.

On Wednesday, Canada will release data on international securities transactions, in addition to leading indicators and a monthly manufacturing survey.

U.S. Treasuries were mostly flat, with the shorter end of the curve up on Tuesday. The two-year note yield fell 2 bps to 0.82%. The 10-year note yield dropped 2 bps to 3.6%.

"The market was very quiet today," said Nick Kalivas, a market strategist at MF Global Holdings Ltd. "There seems to be a kind of lack of direction, which is a little bit surprising given all the data we had. The market is really pretty range-bound."

Some market uncertainty over how to interpret the retail sales data, which had been pressured by severe weather, kept bonds mostly flat, he said.

Retail sales were up 0.3%, though below expectations of a 0.6% increase, according to the Commerce Department. The New York Federal Reserve Bank's Empire State manufacturing survey rose to 15.43, close to expectations with a slight weakness on new orders, shipments and employment. The National Association of Home Builders housing market index was unchanged at 16 in February.

Asset-backed notes price

The Canadian Capital Auto Receivables Asset Trust II sold C$744.6 million in five tranches of asset-backed notes on Tuesday, a source said.

The size of the series 2011-1 notes was upsized from C$723.65 million. The deal included three tranches of class A1, A2 and A3 notes (Aaa/DBRS: AAA) sold publicly and two tranches of notes that were not sold publicly. The private offering included C$15.24 million of class B notes due Dec. 17, 2016 and C$5.71 million of class C notes due Feb. 17, 2017.

The C$300 million tranche of 1.845% class A1 notes due April 17, 2013, talked at 57 bps over the Canadian bond curve, priced at par, or a spread of 55 bps over the curve.

The C$208 million 2.632% class A2 notes due Aug. 17, 2014 were sold at par, or a spread of 71 bps over the curve. The notes were talked at 73 bps over the curve.

The C$215.65 million 3.321% class A3 notes due Sept. 17, 2016 priced at par, or a spread of 89 bps over the curve, 1 bp tighter than guidance.

The notes were sold under Rule 144A.

RBC Capital Markets Corp. and Scotia Capital Inc. were the lead managers.

Toronto-based Canadian Capital Auto Receivables Asset Trust II purchases and manages financial assets acquired from General Motors Acceptance Corp. of Canada Ltd. and its affiliates and borrows funds or sells securities to finance the purchases.

NAV Canada sells C$250 million

NAV Canada (Aa3/AA-/DBRS: AA) sold C$250 million of 4.397% G.O. notes due Feb. 18, 2021 at par on Tuesday, an informed source said.

The notes priced at a spread of 84 bps over the Canadian bond curve. The notes were talked at 87 bps over the curve.

The issue has a Canada call at 21 bps.

The deal was managed by RBC Capital Markets Corp., TD Securities Inc., BMO Capital Markets Corp., CIBC World Markets Inc., National Bank Financial Inc., Desjardins Securities Inc. and Laurentian Bank Securities, Inc.

The proceeds will be used to repay C$250 million of G.O. notes that mature Feb. 24.

Ottawa-based NAV Canada is the country's civil air navigation services provider and coordinates the movement of aircraft in Canada.

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