Lack of supply helps Canadian bonds; MetLife, Brookfield, Yellow Media, New Gold trade up

By Cristal Cody

Prospect News, April 5 - New Canadian bonds priced over the week traded tighter on Thursday in light activity before the markets closed early ahead of the Good Friday holiday, sources said.

Investment-grade activity saw light trading flows on the half-day Thursday.

"It's very quiet. No new deals," a syndicate source said. "Really don't see anything in terms of movement. It's pretty much flat today."

Bonds overall widened in the light trading flows. The Markit CDX Series 18 North American investment-grade index eased 4 basis points to a spread of 97 bps on the day.

Metropolitan Life Global Funding I's new issue that priced the previous day traded about 2 bps better, a source said.

Brookfield Asset Management Inc.'s notes, which were sold earlier in the week, also traded better, along with National Bank of Canada's offering on Monday, a source said.

National Bank of Canada's 10-year subordinated notes, which priced at the start of the week, are in about 5 bps on the week.

"Generally, all the new issues this week are tighter regardless of the negative global market tone," a source said. "It's very stable in Canada, partially because of the lack of supply recently."

High-grade and high-yield primary activity in Canada is expected to be slow to non-existent in April, sources said Thursday.

In the investment-grade market, the "pipeline is yet to be determined but it's pretty light at the moment," one source said.

Canada's high-yield market has a flat primary activity forecast for April.

"No new issues are expected within the month," a high-yield bond source said, noting it was "not like the U.S."

Canadian high-yield bonds traded better on the week.

Yellow Media Inc.'s bonds were up 1 point to 2 points in trading over the week after a report that senior bondholders have organized a call and plan to take over in a debt-for-equity swap.

New Gold Inc.'s U.S. dollar-denominated $300 million issue of eight-year senior notes, which were sold on Monday, traded up 2 points going out on Thursday, a trader said.

"Everything else is pretty much unchanged on the week," the trader said.

Government bonds were mixed after stronger jobs data. Canada's 10-year note yield rose 2 bps to 2.12%. The 30-year bond yield fell 1 bp to 2.67%.

Statistics Canada said that employment rose by 82,000 in March, which brought the unemployment rate down 0.2% to 7.2%.

MetLife Funding better

Metropolitan Life Global Funding I's 2.624% notes due 2015 traded 2 bps tighter on the day, a source said on Thursday.

Metropolitan Life Global Funding I sold C$350 million of the three-year maple notes (Aa3/AA-/) at a spread of 123.1 bps over the Government of Canada benchmark, or 125 bps over the Canadian bond curve, on Wednesday.

MetLife Global Funding is the funding arm of U.S.-based insurance company Metropolitan Life Insurance Co.

Brookfield firms

Brookfield Asset Management's 3.95% medium-term notes due April 9, 2019 traded 3 bps tighter, closing the week at 205 bps bid, a source said on Thursday.

Brookfield Asset Management sold C$425 million of the notes (Baa2/A-/DBRS: A) at a spread of 208 bps over the Canadian government benchmark.

Toronto-based Brookfield Asset Management is a global alternative asset manager with about $150 billion of property, power and infrastructure assets under management.

National Bank of Canada firms

National Bank of Canada's 3.261% fixed-to-floating-rate notes due April 11, 2022 traded in about 5 bps on the week to the 164 bps area, a source said on Thursday.

National Bank of Canada priced C$1 billion of the subordinated notes (Aa3/A-/DBRS: A) at a spread of 168.9 bps over the Canadian government benchmark on Monday.

The financial services company is based in Montreal.

Yellow Media up

Yellow Media's bonds with maturities from 2015 through 2020 traded up 1 to 2 points over the week to 49 bid, a trader said.

"Yellow Media is a bit better," the trader said.

The issues include 7.3% notes due 2015, 5¼% notes due 2016, 5.85% notes due 2019 and 7¾% notes due 2020.

Bondholders have announced a call to make a proposal to restructure the company.

Yellow Media (/BB+/BB) has about C$1.5 billion of debt outstanding.

Montreal-based Yellow Media is the largest directory publisher in Canada.

New Gold rises

New Gold's 7% notes due 2020 rose to 101.5 bid, 102 offered, a trader said on Thursday.

The company tapped the U.S. high-yield market to sell $300 million of the eight-year senior notes (B2/BB-) at par on Monday.

The Vancouver, B.C.-based copper and gold mining company plans to use the proceeds to fund the redemption of its Canadian dollar-denominated 10% senior secured notes due 2017 and for general corporate purposes.

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