TransCanada Pipelines in market with two-part deal; Bonds widen, Yellow Media edges higher

By Cristal Cody

Prospect News, Nov. 9 - TransCanada Pipelines Ltd. brought a C$750 million two-tranche deal in the Canadian investment-grade bond markets on Wednesday after the handful of high-yield deals sold the previous day, market sources said.

Primary activity on the high-grade side is expected to stay active into December, though high-yield offerings may be on the wane after Tuesday's sales from Newalta Corp., Ford Credit Canada Ltd. and Cara Operations Ltd., according to sources.

In the week ahead, Canada Housing Trust plans to be in the market with two tranches of Canada mortgage bonds.

On Wednesday, bonds mostly traded weaker on the day as exposure to European debt continues to worry investors. The Markit CDX Series 17 North American high-grade index eased 9 basis points to a spread of 130 bps on Wednesday.

One junk-rated bond, though, is edging back up in trading, a source said.

Yellow Media Inc.'s short-dated notes traded up nearly 4 points from a week ago, the source said.

Canadian government bonds rallied across the curve as risk sentiment waned on the back of Italy's sovereign debt widening further on Wednesday.

Canada's 10-year note yield fell to 2.08% from 2.15%. The 30-year bond yield fell 3 bps to 2.72%.

"Classic risk-off day," a bond source said, saying it was "all centered around Italy. We're looking at Italian yields pushing above levels that are consistent with debt instability."

Reports also that the European Central Bank is not ready to step in to support Italy also sent investors into safer assets, "mostly clearly U.S. Treasuries but also Canadian treasuries as well," the bond source said.

U.S. Treasuries improved with yields down 12 bps on the 10-year note at 1.96%.

Economic data across both borders is light for the short trading week. The bond markets in Canada and the United States are closed on Friday for holidays.

TransCanada Pipelines prices

In the primary market on Wednesday, TransCanada Pipelines raised C$750 million in the sale of two tranches of medium-term notes (DBRS: A), a bond source said.

The company sold C$500 million 3.65% notes due Nov. 15, 2021 at 99.867 to yield 3.666%. The notes priced at a spread of 154.8 bps over the Government of Canada benchmark.

In the second tranche, TransCanada Pipelines priced C$250 million 4.55% bonds due Nov. 15, 2041 at 99.4 to yield 4.587%, or a spread of 184 bps over the government benchmark.

TD Securities Inc. was the lead manager.

Calgary, Alta.-based TransCanada Pipelines operates natural gas and oil pipelines.

Yellow Media better

Yellow Media's bonds are trading better with the 6.5% notes due 2013 (DBRS: BB) up to 75.5 from 68 quoted a week ago, a bond source said on Wednesday.

The phone directory publisher is based in Montreal.

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