New bond action led by Royal Bank of Canada, Taseko Mines, Ontario, Bank of Nova Scotia

By Cristal Cody

Prospect News, April 12 - Royal Bank of Canada led the day's action, while the Province of Ontario and the Bank of Nova Scotia tapped the Canadian and U.S. markets in bond reopenings and Taseko Mines Ltd. brought its high-yield deal, according to sources.

The high-yield deal, while a U.S. dollar-denominated offering, still had been much anticipated due to a shortage of new deals priced in the Canadian sector, according to sources.

"The market's been good, preparing for the next wave of deals that's coming," one Canadian high-yield bond source said. "What's come so far in Canada, only six so far this year, but four of them were in the oil and gas sector. We expect to see another one in a month or so but at a Canadian pace, not a U.S. pace."

The source estimates the Canadian market will see perhaps 20 high-yield deals over 2011.

"We really just can't get product in the market fast enough," the source said.

The Bank of Canada, as widely expected, left the overnight interest rate unchanged at 1%.

"There was a little bit of an expectation for them to lay the groundwork for higher rates, although they disappointed on that front a little bit," a source said. "That weighed on expectations for a May hike."

Canadian government bonds rallied on the day along with U.S. Treasuries.

"Initially spreads were a little bit wider, and we rallied after the Bank of Canada statement. Now we're kind of even with the U.S. in 10s."

Canada's 10-year bond yield fell to 3.42% from 3.48%.

Treasuries rallied on Tuesday sending yields down 10 basis points on the short end of the curve after Japan raised the nuclear crisis level to seven from five.

The 10-year benchmark note yield fell to 3.49% from 3.58%.

RBC sells $1.75 billion

In high-grade deals, Royal Bank of Canada sold a $1.75 billion offering of notes (Aa1/AA-/AA) in the U.S. market on Tuesday. The offering included $900 million of three-year floaters and $850 million of five-year fixed-rate notes.

The floaters are due April 17, 2014 and bear interest at Libor plus 30 bps. The notes are not callable.

The fixed-rate notes are due April 19, 2016 and bear interest at 2.875%. They priced at 99.764 to yield 2.926%. The spread came in at Treasuries plus 73 bps. Those notes are also non-callable.

BNP Paribas, J.P. Morgan Securities LLC and RBC Capital Markets LLC are the joint bookrunners for the sale.

The proceeds will be used for general corporate purposes.

RBC is a Toronto-based investment bank.

Bank of Nova Scotia reopens

Also in the U.S. market, the Bank of Nova Scotia priced $150 million in a reopening of 2.375% senior notes due Dec. 17, 2013 (Aa1/AA-) at 101.83, according to a prospectus supplement filed with the U.S. Securities and Exchange Commission.

U.S. Bancorp Investments, Inc. was the bookrunner.

Proceeds will be used for general business purposes.

The notes were previously reopened on Jan. 6 in an add-on of $500 million priced at a spread of 60 bps over Treasuries. The bank originally priced $1 billion in the issue on June 17, 2010 at a spread of 125 bps over Treasuries.

The financial services company is based in Halifax, N.S., and Toronto.

Taseko Mines prices at par

In the high-yield market, Taseko Mines priced a $200 million issue of eight-year senior notes (B3/B) at par to yield 7¾% on Tuesday, according to an informed source.

The yield printed at the tight end of the 7¾% to 8% price talk.

Barclays Capital Inc. ran the books. BMO Capital Markets Corp. and TD Securities (USA) LLC were the co-managers.

The notes were trading in the secondary at 102.5 bid, 103 offered, a source said.

The Vancouver, B.C., mineral and metals exploration and production company plans to use the proceeds to fund the expansion of Gibraltar Mine and for general corporate purposes.

Ontario sells C$750 million

The Canadian provincial market also some saw action early with a reopening from the Province of Ontario. The province (Aa1/AA-/DBRS: AA) sold C$750 million in an add-on to its 4% benchmark notes due June 2, 2021 at 98.222 to yield 4.217% on Tuesday, an informed source said.

The notes priced at a spread of 70.5 bps over the Government of Canada benchmark.

BMO Capital Markets was the lead manager.

The province previously reopened the issue on March 31 to sell C$750 million of the notes at a spread of 71.5 bps over the government benchmark. The total outstanding now is C$3 billion.

Catalyst trades up

In secondary trading, a trader said that Catalyst Paper Co.'s 7 3/8% notes due 2014 were at 73½ bid, 74½ offered, calling the Richmond, B.C.-based paper maker's bonds up perhaps ½ point on the day.

Nortel active

A trader said that Nortel Networks Ltd.'s 10¾% notes due 2016 were pretty much unchanged at 91 bid, 92 offered, while the Toronto-based communications equipment maker's floating-rate notes scheduled to come due in July were at 88 bid, 89 offered.

"It does seem like there was a lot of Nortel quoted today," he said.

A market participant at another desk saw Nortel's floaters among the most actively traded issues, with over $22 million changing hands just above the 88 level.

Paul Deckelman, Paul A. Harris and Sheri Kasprzak contributed to this review

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