Canada Housing Trust, Enbridge Gas come to market; bank paper firms; Cara to start roadshow

By Cristal Cody

Prospect News, Nov. 17 - In a much expected sale, Canada Housing Trust sold an upsized C$4.15 billion in two tranches of five-year floating-rate notes and 10-year fixed-rate notes on Wednesday, according to sources.

The two-part issue (Aaa/AAA/AAA) was set at a minimum of C$3.5 billion on Tuesday.

"Generally, demand remains steady for government debt," a source said.

Canada Housing Trust priced C$2 billion in floating-rate notes due March 15, 2016 at par, or a spread of 12 bps plus the three-month Canadian dealer offered rate. The notes priced in line with guidance and were oversubscribed.

Canada Housing Trust also sold C$2.15 billion in a reopening of its 3.35% notes due Dec. 15, 2020 at 99.366, or a spread of 34 bps over the Government of Canada June 2020 benchmark, to yield 3.425%. The 10-year notes were talked at 33.5 bps over governments.

"The 20 was launched in the area of 33 and half," a source said. "It eventually came at 34, which was in context with a little bit of widening of government bonds in general."

The bookrunners were CIBC World Markets, National Bank Financial, RBC Capital Markets Corp. and TD Securities Inc.

Canada Housing Trust sells Canada Mortgage Bonds through the Canada Mortgage and Housing Corp. and uses the proceeds to purchase mortgages from financial institutions.

Canadian government bond yields closed higher on Wednesday. Canada auctioned C$1.4 billion of bonds due June 1, 2041 to strong demand Wednesday at an average yield of 3.638%.

The yield on Canada's 10-year note fell to 3.097% from 3.1%. The two-year note yield was flat at 1.584%.

"The sharp sell-off in the U.S., Canada hasn't quite kept pace with," said Eric Lascelles, chief Canada macro strategist at TD Securities in Toronto. "In the U.S., the rally on the short end seems motivated by economic data."

U.S. Treasuries fell in a late afternoon sell-off on Wednesday. The 10-year benchmark Treasury note yield rose to 5 bps to 2.88%. The yield on the two-year note slipped 2 bps to 0.48%.

Canada has several economic reports scheduled for release on Thursday, including leading indicators, wholesale trade and international securities transactions.

"That has some potential to move markets. Canada's bond market may be positioned for a further rally on the back of that," Lascelles said.

Enbridge Gas sells

In the Canadian high-grade bond market, Enbridge Gas Distribution Inc. priced C$400 million in a two-part sale of medium-term notes (A/A-/), a source said.

"The pricing on both tranches tightened in 2 basis points after launch," the source said. "The market opened up slightly more positive than yesterday and the Enbridge deal was very well received."

The company sold C$200 million in 4.04% notes due Nov. 23, 2020 at 99.959, or a spread of 94.2 bps over the Government of Canada benchmark bond due June 2020, to yield 4.045%. The notes were talked at 94 bps, plus or minus 2 bps.

In the second tranche of long bonds, Enbridge Gas sold C$200 million of 4.95% bonds due Nov. 22, 2050 at 99.792, or a spread of 126 bps over the Government of Canada benchmark bond due 2037, to yield 4.962%. Guidance on the notes was given at 126 bps plus or minus 2 bps.

The lead bookrunners were TD Securities Inc. and RBC Capital Markets Corp.

Calgary, Alta.-based Enbridge Gas owns Canada's largest natural gas distribution company.

Financial bonds firm

The corporate bond tone was positive on the day, and Canadian high-grade paper firmed in secondary trading, according to sources.

"Yesterday, Canada banks were about 5 to 10 basis points wider," a source said. "Today, they opened up a little stronger and also saw some spread improvement."

Cara to start roadshow

Coming up, Cara Operations Ltd. will begin a roadshow on Friday in Toronto for its C$200 million offering of five-year senior secured second-lien notes, according to an informed source.

The deal, which is being shopped by Scotia Capital, will be shown again on Monday in Toronto, and on Tuesday in Vancouver.

The notes come with two years of call protection.

Proceeds from the sale of the notes will be used to reduce bank debt.

Cara Operations is the largest full-service restaurant operator in Canada. The company is headquartered in Vaughan, Ont..

Paul A. Harris contributed to this report

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