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Bond issues on fire despite stock rally

Investors want bonds. Lots of 'em.

Despite a solid stock market, fixed-income new issues have flown off the shelves, allowing certain firms to launch their biggest deals ever.

Last week, Caisse Centrale Desjardins issued $800-million of a 4-year senior note, which was not only upsized from $500-million and had demand beyond the final size, but was also the firm's largest domestic issue ever as well as its lowest coupon ever, at 2.281 per cent.

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Bank of Nova Scotia also tapped the market for $1.75-billion in a Tier 2B deal, which was its biggest on record.

The strength continued over the past few days, with firms such as Pembina Pipeline Corp., Canadian Imperial Bank of Commerce and Laurentian Bank tapping the market. As Lawrence Park Capital Partners noted, rising rates are enticing investors who want spread products. The Government of Canada's 10-year bond yield is up about 15 basis points month-to-date.

It's been a solid year for bond issues overall. Five of the last six months beat 2011 issuance, and average weekly issuance in 2012 is $1.85-billion, according to Desjardins Securities, slightly higher $1.74-billion for all of 2011.

It's easy to see why issuers like this market. The weighted average coupon in Canada this year is 3.31 per cent, versus 4.15 per cent last year.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More


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