Canadian markets quiet on year-end activity; secondary flow good; provincial bonds firm

By Cristal Cody

Prospect News, Dec. 19 - Canadian market activity hummed with clean-up tasks on Wednesday with no more issuance expected for the rest of the year, according to syndicate sources.

"It's a pretty quiet day with lots of year-end stuff going on here," a bond source said.

The quiet day followed the Province of Quebec's busy calendar on Tuesday when it sold C$1.2 billion in three offerings, including two reopenings of its 4.25% medium-term notes due Dec. 1, 2021.

"Quebec finished the year off on a pretty sweet note," one bond source said. "They had their largest amount issued in a single day. The last possible day to do a deal this year and to do C$1.2 billion shows demand and cash is out there from investors."

Another bond source said Quebec's reopenings of the 4.25% notes due 2021 were privately placed.

"It was to one buyer," the source said.

Provincial bond spreads traded in 1 basis point on the day.

"Good secondary flow," a source said. "Spreads have performed very well in the last week and a half. Spreads are in 7 or 8 basis points in the last week."

In the corporate markets, bonds ended slightly weaker. Bank paper traded flat to weaker on the day but stronger on the year, market sources said.

Bank of Montreal's five-year senior bank deposit notes are trading 30 bps better since the start of the year - going out on Wednesday at 95 bps over the Canadian benchmark, a source said.

In trading in U.S. dollar-denominated Canadian bank paper, Toronto-Dominion Bank's paper closed unchanged to slightly weaker on the day, a market source said.

The Markit CDX Series 18 North American investment-grade index eased 1 bp to a spread of 90 bps on Wednesday.

The Markit CDX Series 18 North American high-yield index fell to 101.81 from 102.06.

Canadian government bonds closed mixed. The 10-year note yield rose 1 bp to 1.85%. The 30-year bond yield ended flat at 2.42%.

Wholesale sales rose 0.9% in October following a 1.5% drop the previous month, Statistics Canada said in a report.

Canada's economy is expected to pick up in the latter half of 2013, the International Monetary Fund said on Wednesday. The fund forecasts Canadian gross domestic product growth of just below 2% in 2013 with an increase to 2.25% in 2014.

TD Bank eases

In the secondary market, Toronto-Dominion Bank's 2.375% notes due 2016 eased 3 bps to 46 bps on Wednesday, a market source said.

TD Bank sold $600 million of the notes (Aaa/AA-) in a reopening on Nov. 3, 2011 at 117 bps over Treasuries.

The bank and financial services company is based in Toronto.

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