Canadian bonds, financials weaker; government bonds rally; issuers stay away from market

By Cristal Cody

Prospect News, Aug. 4 - Canadian corporate bonds widened in trading on lighter flows on Thursday, while government bonds rallied on a flight to quality amid global economic fears.

The corporate primary calendar is expected to stay light into August. Only one deal in the preferred stock market priced on Thursday, and no new bond offerings emerged.

"There is no new issue market," one syndicate source said. "I won't say it's closed but it's quite a challenge to get anything done on a day like today. In general on days like today in Canada, everything just shuts up. There's nothing in the pipeline tomorrow."

No bond offerings are expected to price on Friday, depending on the market tone and the outcome of employment reports due out in Canada and the United States, sources said.

Many companies are reporting earnings, but until "we get some more improved tone" no new corporate bond deals are likely, the source said.

Trading flows were light on Thursday.

Bonds in the financial sector traded wider on Thursday. The new C$1.76 billion issue by Toronto-Dominion Bank priced the previous week widened about 2 basis points, a bond source said.

"It's one of the more liquid bonds out there," the source said. "Given the market, it's in pretty good shape."

In other trading, talk about pressure on bonds from real estate investment trusts popped up, but at least one source said he's not seeing it.

"Haven't heard any pressure on the REITs," the source said. "Just checked the volume on REIT accounts, it's pretty modest. Everything's wider and you could argue that when things go wider, generally credits that have bigger spreads start to move faster."

Government bonds rallied across the curve as investors in stocks fled to the safety of government bonds.

Canada's 10-year note yield fell 15 bps to 2.5% on Thursday. The 30-year bond yield dropped to 3.09% from 3.18%.

Sun Life prices preferreds

Sun Life Financial Inc. said Thursday that it priced C200 million of series 10R class A non-cumulative rate reset preferred shares at C$25.00 per share.

The preferreds yield 3.9% annually for the initial period ending Sept. 30, 2016. Every five years thereafter, the dividend rate will reset at a rate equal to the five-year Government of Canada bond yield plus 217 bps.

The deal priced through a syndicate led by Scotia Capital Inc., BMO Capital Markets Corp. and RBC Dominion Securities Inc.

Proceeds will be used for general corporate purposes.

The company has applied to list the series 10R shares as of the closing date on the Toronto Stock Exchange.

Sun Life Financial is a Toronto-based international financial services organization.

Toronto-Dominion Bank wider

Bonds in the financial sector widened on Thursday in secondary trading, including the 2.948% five-year deposit notes that Toronto-Dominion Bank (Aaa/AA-/DBRS: AA) priced on July 27.

The notes due Aug. 2, 2016 opened the day at 85 bps bid, 82 bps offered, a source said.

The bank sold an upsized C$1.75 billion of the notes at 83 bps over the Canadian bond curve.

Toronto-Dominion Bank is a Toronto-based bank and financial services company.

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