Intact Financial, provinces take advantage of window in bond market to secure low yields

By Cristal Cody

Prospect News, Aug. 12 - Canadian issuers saw a chance on Friday and came to market with four bond offerings in the corporate and provincial sectors after no issuance all week.

In the corporate sector, Intact Financial Corp. sold C$300 million 10-year medium-term notes. In the provincial market, the provinces of Ontario, Quebec and Alberta all sold deals on Friday.

"They've all been waiting for this [and] finally got a little window," a corporate bond source said.

The provinces sold C$1.75 billion of bonds across the curve.

"Credit tone is positive," a provincial bond source said. "The tone turned around and investors showed up. Provincial spreads tightened in at the end of the day."

The flurry of deals was unusual for a Friday, "but obviously these three large provinces all wanted to take advantage of extremely low yields that we've seen in government markets," another provincial bond source said. "The absolute yield has come down to very favorable levels."

Yields had widened and Ontario's 10-year note yield rose 18 basis points over the week and Quebec's rose about 16 bps, the source said.

Market tone improved on Friday on a relatively calm day. Canadian government bond yields hit record lows on the volatile markets during the week.

"Five-year Government of Canada yields have come down by more than 50 bps since the start of the month," a source said.

The five-year note yield fell below 1.5% during the week but has since nudged back up 3 bps to 1.52% on Friday. The 30-year bond yield fell below 3% and also edged up since then to 3.09% from 3.06%.

"The bond market held in today. It was a relatively calm day in both the equity and bond markets," the source said.

Intact Financial prices

In the first corporate bond sale in Canada this month, Intact Financial (DBRS: A) brought C$300 million of 4.7% 10-year medium-term notes, which priced at 99.945 to yield 4.707% on Friday, an informed bond source said.

The notes due Aug. 18, 2021 priced at a spread of 220 bps over the Government of Canada benchmark.

CIBC World Markets Inc., RBC Capital Markets corp. and TD Securities Inc. were the bookrunners.

The proceeds will be used to help fund the acquisition of AXA Canada.

Intact Financial sold C$225 million of series 3 non-cumulative rate reset class A preferred shares on Tuesday as part of the effort to raise funds for the merger.

Toronto-based Intact Financial is the largest provider of property and casualty insurance in Canada.

Ontario sells C$750 million

The Province of Ontario (Aa1/AA-/DBRS: AA) sold C$750 million in a reopening of its 4% benchmark notes due June 2, 2021 at 105.916 to yield 3.288%, according to a bond source.

"The deal went very well and spreads tightened in at the end of the day," the source said.

The notes priced at a spread of 85 bps over the Government of Canada benchmark.

TD Securities Inc. was the lead manager.

The issue was previously reopened on July 12 in a C$750 million add-on priced at 102.629 to yield 3.68%, or a spread of 74.5 bps over the Government of Canada benchmark.

The issue now has a total of C$6.75 billion outstanding.

Quebec brings C$500 million

Also in the market on Friday, the Province of Quebec (Aa2/A+/A) priced C$500 million of 4.25% bonds due Dec. 1, 2043 at 103.875 to yield 4.034%, a bond source said.

The bonds priced at a spread of 97 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

The deal closes on Wednesday.

Alberta sells five-year notes

The Province of Alberta (Aaa/AAA/DBRS: AAA) also tapped the market on Friday for C$500 million of 1.85% notes due Sept. 1, 2016 at 99.866 to yield 1.878%, an informed bond source said.

The notes priced at a spread of 38.5 bps over the Government of Canada benchmark.

TD Securities Inc. was the senior manager.

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