Canada's markets quiet on lack of liquidity; Kinross Gold widens, Toronto-Dominion flat

By Cristal Cody

Prospect News, Dec. 21 - Canadian bond markets traded quietly on Wednesday as liquidity continued to dry up in the seasonal slowdown, sources said.

Corporate bond spreads were tighter overall on Wednesday. The Markit CDX Series 17 North American investment-grade index firmed 2 basis points to a spread of 125 bps.

Toronto Dominion Bank's 2.375% notes due 2016 traded unchanged as financials mostly improved, sources said.

In other trading, Kinross Gold Corp.'s bonds widened in the secondary market as gold prices slipped.

Lack of liquidity is expected to continue even more so for the remainder of the short trading week and the upcoming week, though a C$100 million deal is expected from government issuer Hydro One Inc. for 4% bonds due 2051 (DBRS: A).

The corporate and provincial bond markets are "effectively closed for the year," a bond source said. "We're in that pre-Christmas lull."

Deal levels are expected to pick up in January with at least one high-yield deal in the works for the latter part of the month, a source said.

Provincial issuance also is expected to pick up quickly in January, according to one source.

"We firmly expect provincial governments will come out of the gate running in 2012," the source said. "Ontario and Quebec and others have a desire to pre-fund - to get a jumpstart on next year's fiscal year funding requirements, which starts April 1."

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