Canadian bonds turn higher on Fed plans; Quebec bonds narrow; Valeant sells $1.2 billion

By Cristal Cody

Tupelo, Miss., Sept. 21 - Canadian bonds rose on the U.S. Federal Reserve's announcement on Tuesday that it stands ready take additional stimulus steps.

"Yields turned lower in the wake of the FOMC statement," said Fergal Smith, managing market strategist at Action Economics in Toronto.

The Canadian 10-year bond yield fell 4 basis points to 2.905%.

"The curve has steepened slightly in contrast with Treasuries," Smith said.

The two-year note yield fell 5 bps to 0.146%.

In light economic data on Tuesday, Statistics Canada said the Consumer Price Index fell 0.1% in August after a gain of 1.8% in July.

U.S. Treasuries rallied on the Federal Reserve's Federal Open Market Committee statement after the one-day meeting that inflation is running below target areas and it would provide additional quantitative easing if needed.

In supply on Tuesday, Quebec priced C$500 million in a reopening of its 4.5% provincial bonds due 2020 at 91.5 bps over government benchmark bonds, Smith said.

Quebec also sold C$500 million in a reoffering of the same issue on Aug. 18.

"Like all provincial bonds, spreads have been narrowing of late," Smith said. "For the same issue last month, the spread was 95 basis points."

Additional sale details were not immediately available.

Valeant prices $1.2 billion

In the corporate bond market, Valeant Pharmaceuticals International Inc. placed an upsized $1.2 billion amount of senior notes (B1/B+) in two tranches on Tuesday, according to market sources.

The Mississauga, Ont., specialty pharmaceutical company priced a $500 million issue of 6¾% seven-year notes at 99.50 to yield 6.84%.

The yield printed inside of the 7% price talk.

Valeant Pharmaceuticals also priced a $700 million issue of 7% 10-year notes at 99.375 to yield 7.09%.

The 10-year notes also priced inside of price talk, which had been set at 7¼%.

Goldman, Sachs & Co., Morgan Stanley & Co. Inc. and Jefferies & Co. were the joint bookrunners for the issue, which was upsized from $1 billion.

Proceeds will be used to help fund Valeant's merger with Biovail Corp.

CHC Helicopter talks

Also in the market, CHC Helicopter SA talked its $1.1 billion offering of 10-year first-lien senior secured notes (B1//) with a 9¼% to 9½% yield, an informed source said on Tuesday.

The books close at 11:30 a.m. ET on Wednesday, and the deal is set to price thereafter.

Morgan Stanley, HSBC, RBC Capital Markets and UBS Investment Bank are the joint bookrunners.

The notes come with five years of call protection.

The notes are in the market via Rule 144A with registration rights.

Proceeds will be used to repay all of the outstanding debt under the company's existing senior credit facilities and to pay breakage fees on interest rate swaps.

The prospective issuer is a commercial helicopter operator based in St. John's, Newfoundland.

Paul A. Harris contributed to this report

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