Ontario reopens long bonds, brings C$1.2 billion in last two sessions; provincials tighten

By Cristal Cody

Prospect News, Dec. 17 - The Province of Ontario sold a C$600 million offering of its long bonds following an offering on Friday as primary activity cools going into the year-end, bond sources said.

No Canadian corporate issuance was seen on Monday, according to bond sources.

A potential offering from the Province of Quebec may be in the offing ahead of the holidays, but otherwise "it will start to get quiet tomorrow," the source said. "We have one more day before the market officially shuts down. Any deal done tomorrow would have to settle by Friday. We expect it to be low-key until early in the new year."

Provincial bonds continued to trade stronger on Monday.

"It's been another good day in the secondary provincial market," one source said. "Spreads are about a basis point narrower across the curve again today. They were a half basis point better on Friday."

In trading over the past week, five-year provincial bonds have narrowed 2 bps, while 10-year and 30-year bonds have firmed 5 bps.

Extra cash from a Dec. 1 coupon flow is helping spreads, along with an improved tone in the credit and equity markets, a provincial bond source said.

"It's lent to the fairly positive tone up here, especially in the provincial space with investors being up cash and the view they'll go the next three weeks or so without seeing any issuance," the source said.

The Province of Ontario sold its offering on Friday at a spread of 103.5 bps, and the bond came a ½ bp tighter in Monday's offering.

The bonds tightened to 102 bps later Monday in the secondary market, a source said.

In the corporate markets, the Markit CDX Series 18 North American investment-grade index ended the day at a spread of 92 bps.

The Markit CDX Series 18 North American high-yield index closed at 101.49.

Canadian government bonds fell in trading, tracking a drop in U.S. Treasuries. Canada's 10-year note yield rose 4 bps to 1.83%. The 30-year bond yield closed 2 bps higher at 2.40%.

Statistics Canada said in a report on Monday that non-residents in October acquired C$13.3 billion of Canadian securities, led by corporate and government bonds.

Foreign investors purchased C$8.9 billion of Canadian private corporate bonds, which mainly were new U.S. dollar-denominated bonds placed in the United States, according to the agency.

"This inflow was the largest in more than 10 years and coincided with significant overall net new issue activity over the month," the agency said. "Corporate bond yields in the United States were down to near record-low levels in October, while the Canadian dollar traded above par against its U.S. counterpart for a third straight month."

Canadian investors added C$3.2 billion of foreign securities, led by bonds, to their portfolios in October, according to the agency.

Ontario prices C$600 million

The Province of Ontario (Aa2/AA-/DBRS: AA) raised C$600 million in a reopening of its 3.5% bonds due 2043 at 101.429 to yield 3.424% on Monday, an informed source said.

The bonds due June 2, 2043 priced at a spread of 103 bps over the Government of Canada benchmark.

Of the C$600 million, C$400 million was placed on behalf of the syndicate.

CIBC World Markets Inc. was the lead manager.

The add-on followed the province's $600 million reopening on Friday of the issue in an offering that priced at par to yield a spread of 103.5 bps over the government benchmark.

The province first sold the bonds on Jan. 26, 2012 in a C$600 million offering at 99.187 to yield 3.543%, or 88 bps over the Government of Canada benchmark.

The total outstanding is C$8.25 billion.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.