TD Bank sells $5 billion of bonds; Quebec sells C$500 million in add-on; Connacher Oil off

By Cristal Cody

Prospect News, Sept. 7 - The tone improved in the Canadian bond markets on Wednesday after the Bank of Canada's statement was less dovish, convincing a provincial bond issuer to tap the markets in a reopening of 10-year notes, sources said.

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in a reopening of the 4.25% benchmark notes due Dec. 1, 2021 on Wednesday, a bond source said.

"Market tone was good today, definitely a reversal from yesterday," a bond source said. "It allowed Quebec to reopen a 10-year deal. Spreads are in a basis point to a bp and half."

The Province of Ontario also came with a Norwegian offering of NOK 250 million in a reopening of 3.375% five-year notes.

In the U.S. bond markets, Toronto-Dominion Bank priced an upsized $5 billion of covered bonds (Aaa/AAA) in two maturities on Wednesday, a market source said.

Although the week is a short week, primary activity may continue into the week ahead.

"There are some issuers out there that would like to tap the markets," a source said. "Ten- and 30-year Canada rates are all-time record lows yesterday and still remain very low. If things stabilize over the next couple of days, we could see issuance pick up."

Canadian corporate bond spreads were stronger on the day, firming "maybe 3 to 5 basis points," a source said.

High-yield bonds were "better but there's not a lot going on," a trader said, noting "no new issues yet. I wish secondary flow was great, but unfortunately it's not. People still have cash to spend but they're not adding or subtracting."

Connacher Oil & Gas Ltd.'s Canadian dollar-denominated senior notes (Caa2/BB-) edged lower on Wednesday, the trader said.

Government bonds were flat after the Bank of Canada left the 1% overnight rate unchanged. The 10-year note yield was unchanged at 2.26%. The 30-year bond yield eased 1 bp to 2.94%.

TD Bank taps market

Toronto-Dominion Bank priced an upsized $5 billion of covered bonds (Aaa/AAA) in two maturities on Wednesday, a market source said.

The size was increased from $4 billion after the five-year tranche was increased to $3 billion from $2 billion.

The $2 billion of 0.875% three-year notes priced at 99.888 to yield 0.913% with a spread of mid-swaps plus 26 bps or Treasuries plus 58.4 bps.

A $3 billion tranche of 1.625% five-year notes sold at 99.933 to yield 1.639% with a spread of mid-swaps plus 44 bps or Treasuries plus 73.4 bps.

Both of the notes are non-callable.

Bookrunners were Barclays Capital Inc., Deutsche Bank Securities Inc., RBS Securities Inc. and TD Securities (USA) LLC.

TD Bank was last in the market on July 20 with a $2.5 billion sale of two-year floating-rate notes.

The bank and financial services company is based in Toronto.

Quebec sells C$500 million

In Canada's domestic market, the Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in a reopening of the 4.25% benchmark notes due Dec. 1, 2021 at 108.08 to yield 3.311% on Wednesday, a bond source said.

The notes were sold at a spread of 103 bps over the Canadian government benchmark.

National Bank Financial Inc. was the lead manager.

The issue previously was reopened on Aug. 3 in a C$500 million add-on priced at 106.264 to yield 3.52%, or a spread of 87.5 bps. The total amount outstanding is C$4.5 billion.

Ontario sells NOK 250 million

In other deals on Wednesday, the Province of Ontario announced it priced NOK 250 million in a reopening of 3.375% series 108 notes due Jan. 20, 2016 (Aa1/AA-) at 101.925 to yield 2.896%, according to final terms released on Wednesday.

Toronto-Dominion Bank was the dealer.

Proceeds will be used for general provincial purposes.

The province originally sold NOK 500 million of the notes on Dec. 23, 2010 under the C$27 billion debt issuance program.

Connacher Oil down

Trading was stronger but light, sources said. In the secondary market, Connacher Oil & Gas' Canadian dollar-denominated 8¾% senior notes due Aug. 1, 2018 traded at 82 bid, 83 offered on Wednesday, a trader said.

The notes (Caa2/BB-) were quoted on Friday at 84.

The company sold the C$350 million tranche of the notes at par to yield 8¾% on May 20.

The integrated oil company is based in Calgary, Alta.

Andrea Heisinger contributed to this review

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