Canada deal calendar to pick up; Yellow Media notes fall, Trilogy Energy flat in thin trading

By Cristal Cody

Prospect News, Jan. 4 - Canadian bonds ended Friday slightly better in light trading with corporate and provincial bond markets expected to see steady issuance in the weeks ahead, according to informed sources.

"The new issue machine will pick back up again," said Adrian Miller, director of fixed-income strategy at GMP Securities. "It should be quite active in the U.S. and to some extent in Canada as well. Flows have not been positive in high yield but there's still a demand for it, so we expect a return to an active calendar."

Canadian investment-grade markets ended Friday quietly on expectations the remainder of the month will see a steady deal pipeline, sources said.

"Next week, we'll see some corporate issuance," one high-grade bond source said.

The Markit CDX Series 19 North American investment-grade index firmed 1 basis point to a spread of 85 bps.

The Markit CDX Series 19 North American high-yield index closed up at 102.44 from 102.37.

"U.S. swap spreads pushed out in the morning and tightened in the afternoon market as sentiment changed," Miller said. "We saw something similar with the Canadian market as well, especially with the release of Canadian employment. Canada was positive as was the U.S., and Canadian risk assets responded favorably so spreads tightened on Canadian debt [and] Canadian equities advanced."

Canadian employment rose by 40,000 in December, Statistics Canada said. The unemployment rate fell 0.1% to 7.1%, the lowest in four years.

Secondary market activity stayed quiet across the Canadian corporate markets on Friday, market sources said.

"Dead quiet," one trader said. "There was a little more activity yesterday and there was a little bit done Wednesday, but a lot of people are still out. Nothing's really moved today."

Yellow Media Ltd.'s 9¼% senior secured notes due in 2018 were down about ½ point to 1 point since Wednesday in thin trading.

Trilogy Energy Corp.'s 7¼% senior notes due 2019 were unchanged, a trader said.

Canadian government bonds fell on the short end. The two-year note yield rose 2 bps to 1.21%. Canada's 10-year note yield rose 1 bp to 1.94%.

Yellow Media down

Yellow Media's 9¼% senior secured notes due in 2018 traded on Friday at 99.5 bid, 100.5 offered, a trader said.

The bonds were seen on Wednesday wrapped around 100.5.

Standard & Poor's lowered the Montreal-based directory publisher's long-term corporate credit rating to D from CC and DBRS discontinued the company's ratings on Dec. 20.

The company completed a recapitalization that exchanged the former securities from Yellow Media Inc. for cash, common shares and warrants of Yellow Media Ltd. and new senior secured notes and senior subordinated exchangeable debentures of YPG Financing Inc., the entity previously named Yellow Media Inc. and a subsidiary of Yellow Media Ltd.

Trilogy Energy flat

Trilogy Energy's 7¼% senior notes due 2019 (/B/DBRS: B) went out on Friday unchanged at 102.5 bid, 103.5 offered, a trader said.

The company sold C300 million of the seven-year notes at par on Dec. 6. The notes traded in late December at 102.25 bid.

Trilogy Energy is a Calgary, Alta.-based petroleum and natural gas-focused energy corporation.

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