Bond markets active on early close; Cara better; Connacher Oil, Noranda lower in trading

By Cristal Cody

Prospect News, Sept. 2 - Morning activity gave the Canadian bond markets a slight boost before the early close on Friday, bond sources said.

The Canadian and U.S. bond markets will be closed on Monday for the Labor Day holiday.

After the holiday break, primary activity in the corporate and provincial markets is expected to pick up after a slow August.

In the secondary market, corporate high-yield bonds edged up over the week on buying in higher-rated BB names such as Noranda Operating Trust, Precision Drilling Corp. and Viterra Inc., a trader said.

In other trading, Connacher Oil & Gas Ltd.'s Canadian dollar-denominated senior notes (Caa2/BB-) dropped a point in the secondary market over the week, a trader said.

Canadian government bonds and Treasuries rallied on weaker U.S. payroll data for August.

Canada's 10-year note yield fell 9 basis points to 2.3%. The 30-year bond yield dropped to 2.96% from 3.05%.

"The U.S. report set the tone for markets on both sides," a source said. "It has been busy in the morning - people are trying to cram a lot of activity in the first half of the day. It's a short day in Canada, so everyone is winding up ahead of the long weekend."

Connacher Oil down

Connacher Oil's 8¾% notes due 2018 traded on Friday at 84, down a point on the week, a source said.

The company sold the C$350 million tranche of notes due Aug. 1, 2018 at par to yield 8¾% on May 20.

The integrated oil company is based in Calgary, Alta.

Cara notes higher

Cara Operations' 9 1/8% senior secured second-lien guaranteed notes due Dec. 1, 2015 traded up 1½ points over the week, a source said Friday.

The notes (DBRS: B//BB-/) ended the week at the 102.5 area.

Cara Operations sold the notes in a C$200 million offering on Nov. 24, 2010 at par.

Vaughan, Ont.-based Cara Operations is the largest full-service restaurant operator in Canada.

Noranda down

Noranda's 6 7/8% notes due 2016 (BB) traded down moderately over the week, by about 0.13 of a point to 100.125, a trader said.

The company sold C$90 million of the five-year notes (DBRS: BB) at par to yield 6 7/8% on July 22.

Noranda Operating Trust is owned by Toronto-based Noranda Income Fund and has a 75% interest in Noranda Income LP, which owns the Canadian Electrolytic Zinc metal processing facility in Quebec.

Precision lower

Precision Drilling's 6½% notes due 2019 (Ba2/BB+/) dropped about half a point since the previous week, a bond source said Friday.

The notes were seen early in the day at 103.25.

The company sold C$200 million of the senior notes at par on March 10.

Calgary, Alta.-based Precision Drilling is an oil and gas industry equipment and services provider.

Viterra flat

Viterra's 6.406% senior notes due Feb. 16, 2021 traded flat on the week to the area of 104.5, a trader said.

The company (Ba1/BB/) sold C$200 million of the notes at par on Feb. 10.

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

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