Toronto-Dominion, Goldman wake primary; more financial deals likely; debt firms in trading

By Cristal Cody

Prospect News, Oct. 27 - The Canadian corporate primary market received a boost with the sale of two deals in the financial sector in what is expected to be the first of several more financial offerings, according to sources.

Wednesday afternoon, Toronto-Dominion Bank sold C$1 billion 10-year subordinated medium-term notes that are callable after five years. The notes priced to a good appetite, according to sources.

The Toronto-based bank sold the fixed- to floating-rate MTNs at par with an initial coupon of 3.367%, or a spread of 132 bps over the Canadian benchmark curve. The bonds came slightly tighter than initial price talk of 135 bps over the Canadian benchmark, the source said.

The bonds are structured with a fixed coupon for five years, after which the coupon converts to a floating rate.

TD Securities Inc. was the lead bookrunner.

In the secondary market, Toronto-Dominion's debt firmed in secondary trading by 2 bps to 3 bps.

Earlier in the day, Goldman Sachs Group Inc. priced C$500 million in five-year senior unsecured Maple bonds in Canada on Wednesday, a source said.

Maple bonds are securities denominated in Canadian dollars that are issued by foreign companies.

New York-based Goldman priced the 4.1% bonds due Nov. 3, 2015 at 99.991, or a spread of 208 bps over the Canadian benchmark curve, to yield 4.102%. The bonds priced 2 bps tighter than the price talk of 210 bps over the curve.

RBC Capital Markets Corp. was the lead bookrunner.

"There hasn't really been any issuance of a big U.S. financial in the marketplace for awhile," said Mark Wisniewski, a portfolio manager with Toronto-based Gluskin Sheff + Associates Inc., which manages about C$5.5 billion in assets, including Maple bonds.

"There just seems to be a good appetite for something other than Canadian banks," he said. "The market reception for both deals was pretty significant with a lot of interest across the board."

In secondary trading, Goldman's notes traded 2 bps to 3 bps tighter, he said.

Financial deals ahead

More financial supply is expected to hit the primary into the first half of November, sources said. December is a huge coupon date for many Canadian investors, so there usually is plenty of cash to spend.

"People rush in November to do something," a source said. "There will probably be another bank deal, mostly because it's getting into year-end for them and the blackout period. The obvious candidates are the guys that haven't come yet, Bank of Nova Scotia and Bank of Montreal and National Bank of Canada."

Government bond yields rise

Elsewhere in Canada, government bonds followed the drop in U.S. Treasuries, with yields rising.

Canada's 10-year government bond yield rose to 2.888% from an opening of 2.86%. The two-year government note yield eased to 1.453% from opening the day at 1.43%.

U.S. Treasuries ended Wednesday weaker for the sixth session, sending yields up, as the market anticipates the Federal Reserve's response on the much-speculated asset buyback program ahead of next week's two-day meeting.

The yield on the 10-year benchmark Treasury note rose to 2.72% from 2.64%. The two-year note yield eased 2 bps to 0.41%.

Many are questioning the amount of bonds the Federal Reserve will buy back in a program known as quantitative easing.

"What's happening is a repricing of the market heading into this highly anticipated event," said George Goncalves, strategist at Nomura Securities International, Inc. "This is a profit-taking after a pretty big rally and some squaring up positions. People are rethinking the initial view of QE."

Treasuries also were weaker on lukewarm response to the government's auction of $35 billion in five-year notes on Wednesday.

The Treasury Department auctioned the five-year notes on Wednesday at a yield of 1.33%.

The government plans to auction $29 billion in seven-year notes on Thursday.

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