Westpac sells upsized C$275 million 10-year notes; Potash widens; Canada sells C$3 billion

By Cristal Cody

Prospect News, Oct. 6 - In the lone corporate deal of the week in the Canadian bond market, Australian bank Westpac Banking Corp. reopened its December 2014 bond to sell an upsized C$275 million on Wednesday, a source said.

The deal initially had been pegged at C$200 million.

Westpac priced the 3.75% two-year notes at a spread of 130 basis points over the Canada 2014 benchmark bond.

The bonds were priced "a little bit on the tight side," a source said.

The lead managers of the deal were Scotia Capital and RBC Capital Markets Corp.

The issue has C$400 million outstanding.

"It went really, really well," the source said. "The market's been fairly starved for product and all this talk of quantitative easing got everything moving. People seem to be switching out more fixed income and more yield. This fit the bill today."

The bonds traded stronger in the late afternoon secondary market, a source said.

"It's trading 1 to 2 basis points tighter, so there was a good appetite for it," the source said.

The week is expected to stay quiet for new deals, though some "are in the pipeline," one source said.

"There's a number of things in the works, but it'll probably be a quiet week because Friday is a half day and Monday is a holiday," another source said.

Bond markets will be closed on Monday in Canada for observance of Thanksgiving Day and in the United States for observance of Columbus Day.

Potash widens

Elsewhere in the corporate bond market, Potash Corp. of Saskatchewan Inc.'s notes were flat to slightly wider on the hostile $40 billion takeover offer on the table from BHP Billiton Ltd., traders said Wednesday.

Potash has rejected Melbourne, Australia-based mining giant BHP's offer as too low.

Saskatoon, Sask.-based Potash is the world's largest manufacturer of potash, a key crop nutrient.

Potash's outstanding investment-grade debt includes 5.25% senior notes due 2014; 3.75% senior notes due 2015; 6.5% senior notes due 2019 and 4.875% senior notes due 2020.

The notes due 2019 traded on Wednesday at 150 bps bid, 135 bps offered, a trader said.

The notes due 2020 were seen with a bid of 150 bps.

The notes were slightly wider from trading seen on Monday, a source said.

The notes due 2019 were quoted Monday at an offer of 148 bps, while the notes due 2020 were quoted at an offer of 150 bps.

Also in trading on Wednesday, Potash's bonds due 2036 traded at a bid of 185 bps, a trader said.

Canada auctions C$3 billion

In government bond sales, Canada auctioned C$3 billion of 3.25% notes due 2021 and reported an average yield of 2.836%, according to a statement by the Bank of Canada.

The government received C$7.1 billion in bids.

Proceeds will be used for general government purposes. With the issue of the new bonds, the outstanding total of 3.25% bonds due June 1, 2021 will be C$6 billion.

Canadian government bonds rallied on Wednesday along with U.S. Treasuries that sent yields to new lows as speculation grew that the Federal Reserve will increase the buybacks of Treasury debt on weak economic reports.

Canada's 10-year note yield fell to 2.742% from 2.75%. The yield on Canada's two-year note fell to 1.359% from 1.36%.

U.S. Treasuries jumped, with the yield on the benchmark 10-year note down to 2.38% from 2.46%. The two-year note yield fell 3 bps to 0.3%.

The International Monetary Fund said in its World Economy Outlook report released Wednesday that Canada's economy is expected to grow 2.7% next year, down from an earlier forecast of 2.8%.

The IMF also lowered the U.S. growth forecast for next year to 2.3%, compared to a forecast of 2.9%, in the report.

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