Canadian bank deposit notes end week 20 bps better, mortgage bonds widen

By Cristal Cody

Prospect News, Sept. 16 - Canadian financial paper ended the week much stronger in the bond markets, while high-yield bonds tightened and mortgage bonds widened, sources said Friday.

Corporate bond spreads tightened early morning at the session open and were seen ending the day about 1 basis point to 2 bps tighter, a bond source said.

"Financial spreads have tightened quite a bit this week," a source said. "Deposit notes are in almost 20 basis points in the last three days."

The Bank of Montreal's five-year deposit notes sold in July traded 20 bps better on Friday.

Toronto-Dominion Bank's five-year deposit notes also improved in trading.

"These things came at 82 basis points, so there was a 45 basis point widening in the last two weeks," the source said. "Overall better market tone and recent spread widening is causing investors to come in, buying on the dips."

Canada mortgage bonds widened about 2 bps on the day, "more so in the five-year," a source said. "That may be in anticipation of the five-year fixed deal coming next week. There's a little bit of selling on the scene."

Canada Housing Trust (Aaa/AAA/DBRS: AAA) plans to price C$5 billion to C$6 billion in five-year Canada mortgage bonds in the upcoming week.

Canada Housing Trust's existing 2.75% mortgage bonds due June 15, 2016 traded on Friday at 36 bps bid, the source said.

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