RBC sells C$1.5 billion of notes; CIBC taps U.S. market; Yellow Media bonds trade lower

By Cristal Cody

Prospect News, Dec. 5 - Royal Bank of Canada tapped the Canadian bond market for C$1.5 billion of five-year senior deposit notes, while CIBC brought a U.S. dollar-denominated deal in a reopening of its three-year covered notes in the U.S. high-grade market on Monday, bond sources said.

The CIBC notes "launched at mid-swaps plus 68 [basis points]" and priced late afternoon, a source said.

Also in the Canadian markets, Talisman Energy Inc. raised C$200 million in a sale of preferred stock.

Primary activity across the financial markets likely will stay steady leading up to the holidays, sources said.

"This week and next week will be the last window of opportunity for corporate borrowers," one source said. "A lot of the highly anticipated issuance has been completed already."

Corporate bond spreads have held stable and bonds were firmer overall on Monday, sources said.

The Markit CDX Series 17 North American high-grade index firmed 3 bps to a spread of 123 bps.

In the secondary market, Yellow Media Inc.'s bonds did not react immediately to news that Standard & Poor's had downgraded the corporate rating.

"Nothing so far," a trader said.

Canadian government bonds rallied compared to U.S. Treasuries on Monday as investors considered Canada a safer investment. Canadian bond yields fell 3 bps to 6 bps across the bond curve.

Canada's 10-year note yield fell 6 bps to 2.08%. The 30-year bond yield dropped 4 bps to 2.65%.

The U.S. 10-year Treasury note yield rose 1 bp to 2.04%. The 30-year bond yield fell 1 bp to 3.02%.

"The Canadian market was reasonably well bid throughout the day," a bond source said. "There wasn't really anything on our data front that drove it. The safe haven notion for Canada remains quite strong. The Canadian dollar is hanging in quite well. Canadian bonds are hanging in quite well."

The Bank of Canada will meet on Tuesday, though no rate action is in the forecast.

RBC sells C$1.5 billion

In the domestic market on Monday, Royal Bank of Canada (Aa1/AA-/DBRS: AA) sold C$1.5 billion of 2.68% five-year senior deposit notes at 99.977 to yield 2.685%, according to a bond source.

The notes due Dec. 8, 2016 priced at a spread of 134.3 bps over the Government of Canada benchmark.

RBC Capital Markets Corp. was the bookrunner.

Toronto-based Royal Bank of Canada offers full-service personal and business banking, brokerage and bank-owned mutual fund services.

CIBC sells $2 billion

CIBC priced $2 billion of three-year covered bonds (Aaa/AAA) late on Monday to yield mid-swaps plus 68 bps, a source away from the trade said.

Full terms were not available at press time.

The securities were priced under Rule 144A and Regulation S.

CIBC World Markets, HSBC Securities (USA) LLC, J.P. Morgan Securities LLC and RBS Securities Inc. were the bookrunners.

The financial services company is based in Toronto.

Talisman Energy prices

Also in Canada, Talisman Energy said it priced C$200 million, or 8 million shares, of cumulative redeemable rate reset first preferred stock.

The series 1 preferreds yield a 4.2% annual dividend for the initial period ending Dec. 31, 2016.

The dividend rate then will be reset every five years to the five-year Government of Canada bond yield plus 2.77%.

RBC Capital Markets Corp. and CIBC World Markets Inc. were the lead managers.

The deal includes an over-allotment option of 2 million shares.

Proceeds from the sale will be used to contribute to funding capital projects, to reduce debt and for general corporate purposes.

Talisman Energy is a Calgary, Alta.-based upstream oil and gas company.

Yellow Media bonds lower

In Canada's high-yield market, Yellow Media's longer-dated notes due 2016 and 2020 traded in the 43 to 46 range on Monday, a trader said.

The 5¼% notes due 2016 were quoted at 82 back in June.

The 7¾% notes due 2020 have traded in the 43 bid, 44 offered area for the past quarter, according to sources.

Standard & Poor's said late afternoon that it lowered its long-term corporate credit rating on Yellow Media to BB- from BB+. The agency also lowered the company's senior unsecured debt rating to BB- from BB+ and lowered the issue-level rating on Yellow Media's subordinated debt to B from BB-.

In addition, S&P said it lowered its Canada scale rating on the company's preferred shares to P-4 (Low) from P-4 (High).

Yellow Media's stock (YLO.TO) dropped 4.35% to C$0.22.

Montreal-based Yellow Media is Canada's largest directory publisher.

Andrea Heisinger contributed to this review

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