Quebec taps notes last reopened in 2007; British Columbia prices notes; John Deere firms

By Cristal Cody

Prospect News, Oct. 16 - The Province of Quebec tapped an issue that had not been reopened since 2007 on Tuesday with a C$500 million offering of the 4.5% medium-term notes due Dec. 1, 2017, an informed bond source said.

"It's something we've haven't seen in the last five years," one source said. "It was way oversubscribed."

The province first sold the issue on Jan. 24, 2007 in a C$500 million offering and now has C$4.5 billion outstanding.

"So it was tapped many times throughout '07 and then just again today for the first time in a while," another bond source said.

The provincial sale was the only bond deal that came by on the day in Canada, sources said.

The Province of British Columbia sold an upsized $1.25 billion of 2% 10-year notes in the U.S. dollar market.

Late Monday, John Deere Canada Funding Inc. priced a C$150 million offering of five-year senior medium-term notes - "a small deal even for Canada," an informed source said.

"So there wasn't much that came back," the source said. "We traded about C$20 million of the bonds, so that's a fair amount considering the size."

John Deere Canada's notes traded 3 basis points tighter in secondary trading going out on Tuesday.

Canadian bank and financial paper improved slightly on the day after two days of weaker tone from heavier issuance. Canadian Imperial Bank of Commerce and Laurentian Bank of Canada sold paper on Monday, following a C$1.75 billion 12-year subordinated debt offering from the Bank of Nova Scotia on Friday.

Financial supply eyed

"With the financial bonds that have been sold lately, things have been kind of soft," an investment-grade bond source said. "The market is kind of full of banks and financials now, so it's trading sloppy. Banks are struggling to get back to where they were at issue."

A Canadian bond trader said financial paper is weaker, "but we've seen some pretty good buying today. It was wider yesterday by another basis point and it's in a couple today."

Scotiabank's 12-year subordinated notes are the "only one that's underperformed a bit," the trader said. "This Scotia sub-debt deal was probably too large. It widened 3 or 4 [bps] and is still wider than issue, a couple wider."

Additional bank and financial deals are likely in the week or two ahead, sources said.

"But we have to wait for most companies to release earnings results before they issue; they're in blackout period," one source said. "So once they come out of blackout, they'll probably [be in the market] and we'll probably see that over the next few weeks."

Canadian government bonds traded weaker on better economic data and more confidence in overseas debt crisis containment.

Canadian manufacturing sales rose 1.5% in August, Statistics Canada said in a report on Tuesday.

The 10-year note yield rose 3 bps to 1.83%. The 30-year bond yield ended 2 bps higher at 2.44%.

Foreign investors bought C$7.5 billion of Canadian debt securities in August, up from the C$2 billion acquired in July, Statistics Canada said in a separate report on Tuesday.

The acquisitions were led by Canadian corporate securities. Foreign investors bought C$4.7 billion of Canadian bonds and targeted new bonds issued by public and private corporations, the agency said.

Canadian investors reduced their holdings of foreign debt securities, which included mostly U.S. government bonds and non-U.S. foreign bonds, by C$1.1 billion in August.

Quebec taps market

In the day's only domestic offering, the Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million of the 4.5% medium-term notes due Dec. 1, 2017 at 112.298 to yield 1.962%, an informed bond source said.

The notes priced at a spread of 62 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

The total outstanding is C$4.5 billion.

British Columbia prices

In the U.S. market, the Province of British Columbia priced an upsized $1.25 billion of 2% 10-year notes at a spread of mid-swaps plus 31 bps, or Treasuries plus 35.15 bps, according to an FWP filed with the Securities and Exchange Commission on Tuesday.

The notes (Aaa/AAA/) were sold in line with guidance given late on Monday in the mid-swaps plus low 30 bps area. The size was increased from a minimum of $500 million.

Pricing was at 99.469 to yield 2.059%.

The bonds are non-callable.

Bookrunners were CIBC World Markets Corp., HSBC Capital (USA) Inc., National Bank Financial and Scotia Capital (USA) Inc.

Co-managers were Bank of America Merrill Lynch, BMO Capital Markets Corp., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., RBC Capital Markets LLC and TD Securities (USA) LLC.

John Deere Canada active

Details of the small offering from John Deere Canada Funding (A2//DBRS: A) emerged on Tuesday.

The financing arm of Deere & Co. sold C$150 million of 2.25% five-year senior medium-term notes at 99.958 to yield 2.259%, an informed bond source said.

The notes priced at a spread of 88.7 bps over the Government of Canada benchmark.

RBC Capital Markets and TD Securities Inc. were the lead managers.

The notes are unconditionally guaranteed by John Deere Capital Corp.

John Deere Canada Funding last tapped the Canadian debt markets on June 27 with a C$250 million offering of 2.3% senior medium-term notes due July 5, 2016 (A2//DBRS: A) that priced at a spread of 110.6 bps over the government benchmark.

Andrea Heisinger contributed to this review

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