Winnipeg sells C$50 million add-on; deal activity quiet; corporates off; bank paper flat

By Cristal Cody

Prospect News, June 25 - The Canadian markets kept mostly quiet on Monday with one offering seen from the City of Winnipeg as tone declined with the flight into safer-haven debt on European events, bond sources said.

The City of Winnipeg reopened its 4.3% sinking fund debentures due Nov. 15, 2051 to sell C$50 million.

"The market was off today," one source said, noting it was "very quiet."

Primary activity remains undetermined for the week due to the volatility ahead of the two-day European Union summit that starts on Thursday, bond sources said.

Corporate bond spreads widened overall and stocks fell as investors turned to safer government bonds. The Markit CDX Series 18 North American investment-grade index eased 4 basis points to a spread of 119 bps on Monday.

Canadian bonds traded flat to 1 bp better on the day, a market source said.

Paper from Bank of Nova Scotia and Bank of Montreal both traded about 1 bp tighter.

Canadian Pacific Railway Ltd.'s bonds are trading mostly range-bound but were in 1 bp in the secondary market.

Government bonds rallied across the curve on the euro zone concerns. Canada's two-year note yield fell to 1.23% from 1.31%. The 10-year note yield dropped 7 bps to 1.73%, and the 30-year bond yield closed down 6 bps to 2.30%.

Winnipeg reopens long bonds

The City of Winnipeg (Aa1/AA/) sold C$50 million in a reopening of its 4.3% sinking fund debentures due Nov. 15, 2051 at 109.015 to yield 3.853% on Monday, an informed bond source said.

The debentures priced at a spread of 155 bps over the Government of Canada benchmark.

CIBC World Markets Inc. and TD Securities Inc. were the joint bookrunners. Co-managers were Scotia Capital Inc., RBC Capital Markets Corp., National Bank Financial Inc., BMO Capital Markets Corp. and Casgrain & Co. Ltd.

The city originally sold the debentures in October. The total outstanding is C$100 million.

Scotiabank firmer

In the secondary market, Bank of Nova Scotia's 2.55% notes due 2017 (Aa1/AA-/) firmed 1 bp to 97 bps on Monday from Friday's session, a bond source said on Monday.

Bank of Nova Scotia sold $1.25 billion of the notes on Jan. 5, 2012 at Treasuries plus 172 bps.

The Canadian bank is based in Halifax, N.S.

BMO tighter

Bank of Montreal's 1.3% covered bonds due 2014 firmed 1 bp to 51 bps on Monday, a source said.

The bonds (Aaa//AAA) priced on Oct. 26, 2011 in a $2 billion offering at mid-swaps plus 50 bps, or Treasuries plus 84.9 bps.

The financial services company is based in Toronto and Montreal.

Canadian Pacific better

In the secondary market, Canadian Pacific Railway's 4.5% notes due 2022 tightened to 183 bps from 184 bps on Friday.

Canadian Pacific Railway sold $250 million of the 10-year notes (Baa3/BBB-/) on Nov. 28, 2011 at a spread of Treasuries plus 275 bps.

The railroad operator is based in Calgary, Alta.

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