Royal Bank of Canada notes widen; Viterra paper trades stronger; government bonds improve

By Cristal Cody

Prospect News, April 25 - The Canadian bond markets traded on light volume on Monday as many remained on holiday, according to informed sources.

The bond markets were closed on Friday in observance of the Good Friday holiday.

Corporate bonds were flat to slightly weaker. In secondary trading, Royal Bank of Canada's recently priced notes edged wider, a trader said.

High-yield bonds overall were flat over the previous week but edged higher on Monday, including Viterra Inc.'s 6.406% notes due 2021, according to a source.

In economic data, Canadian retail sales rose 0.4% in February to C$37.3 billion, Statistics Canada said.

Canadian government bonds rallied, tracking U.S. Treasuries on thin trading. Canada's 10-year bond yield fell 3 basis points to 3.24%, while the 30-year bond yield dropped 2 bps to 3.7%.

The 10-year U.S. Treasury note yield fell 4 bps to 3.36%. The 30-year bond yield dropped 2 bps to 4.45%.

"Heard Treasury volume was only at 50% of where it should be," a trader said. "A lot of people are still out."

The Federal Reserve starts its two-day meeting on Tuesday and is widely expected to leave interest rates near zero. After the meeting, the Fed will release a statement and chairman Ben Bernanke will hold a press conference.

"Wednesday is the blockbuster day - it will be the first press conference ever after a Fed meeting," the trader said. "People are waiting on the sidelines to see what comes out of Wednesday's meeting."

RBC notes weaken

In the secondary market, the notes that Royal Bank of Canada sold on April 12 traded slightly wider on Monday, a trader said.

The bank sold $850 million of the 2.875% fixed-rate notes due April 19, 2016 at Treasuries plus 73 bps.

In the secondary on Monday, a trader saw the notes offered at 74 bps.

RBC is a Toronto-based investment bank.

Viterra notes strengthen

In other secondary activity, Viterra's 6.406% notes due 2021 rose to 104.25 bid, 105 offered from 103.5 bid, 104.5 offered on Thursday, a high-yield bond source said.

The company sold the notes on Feb. 10 at par.

Regina, Sask.-based Viterra provides agricultural ingredients to global food manufacturers.

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