Canadian borrowers joined a slew of new debt deals from around the globe to raise at least $22.6 billion (US$17. billion) this week as issuers including the financing arm of the nation’s housing agency and a cannabis company took advantage of a lull in the global trade war.
The Canadian Housing Trust issued $5.5 billion of five-year bonds and Ontario has raised $4.33 billion in three transactions, while four out of the six largest banks are raising to $5.71 billion through benchmark-size deals, according to data compiled by Bloomberg. At least another nine issuers have sold debt so far this week, including Canada-listed Trulieve Cannabis Corp. doing the first pot bond with a publicly available prospectus.
Bond issues so far this month have already surpassed the US$18.6 billion amount raised in May, which was the slowest for such a month on record, according to data compiled by Bloomberg going back to 2008. Issuers are speeding up sales after President Donald Trump put a hold on a threat to impose tariffs on Mexico amid a spat over immigration.
“The market seems to be soothed so get in while you can,” said Randall Malcolm, senior managing director of fixed income at Sun Life Investment Management.
The risk premium on the Bloomberg Barclays Canada Aggregate Corporate TR index declined to 1.21 per cent on Wednesday, compared with 1.24 per cent at the end of last week. That partially offset the increase in government bond yields, the benchmark used to price transactions, so issuers borrowing costs remain close to the lowest levels since Decemnrt 2017, before the latest three interest hikes in Canada.
The market seems to be soothed so get in while you can
“For a treasurer, you have a winning combination: low rates plus a quieter corporate calendar in May so basically your window of opportunity is open,” said Montreal-based Yves Paquette, a portfolio manager at AllianceBernstein Holding LP, which manages US$550 billion of assets. “As a result we get a busier Canadian corporate new issue market.”
Here is a roundup of this week’s issuance:
The Canadian Housing Trust tapped its 2.9 per cent bonds due 2024 ahead of the planned removal of its 1.2 per cent and 1.45 per cent bonds maturing in 2020 from the FTSE TMX index for Canada agencies, according to a Scotiabank note to investors.
Ontario has raised almost $11.5 billion, or 32 per cent of its planned funding needs for the fiscal year, after this week’s transactions. Quebec and Saskatchewan also came to the market this week.
National Bank of Canada, which sold $500 million deposit notes Monday, priced US$1 billion of three-year mortgage covered bonds, in the third sale of such securities out of Canada this week. The bonds were priced at 30 basis points over the mid-swaps rates.
Smaller lender Laurentian Bank of Canada priced $300 million of three-year deposit notes at a 120-basis-point spread, three days after selling $339 million of securities pooling government-backed mortgages at an spread of 52 basis points. Earlier this week, at least six Canadian financial issuers priced deals.
Non-financial companies including Keyera Corp. raised debt. The natural gas company raised $600 million of hybrid bonds, which were priced to yield 6.875 per cent.
Pot company Trulieve issued US$70 million of 9.75 per cent secured bonds due 2024, the company said in June 11 statement, which were sold in conjunction with 1.47 million of warrants that give investors the right to buy company shares over a three-year period. The notes were placed with around 20 accounts, according to Greg Woynarski, head of fixed income at Canaccord Genuity Co, the arranger of the deal.
“After we saw spreads widen in recent weeks due to trade frictions, the resolution of those related to Mexico has seen the appetite for risk return,” said Patrick O’Toole, portfolio manager at CIBC Asset Management, who helps manage $70 billion in fixed income. “Companies are happy to fill some of that need for higher yield.”