Canadian bond issuers rush ahead of US debt ceiling deadline

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(Bloomberg) — Corporate issuers are racing to sell debt denominated in Canadian dollars as the standoff around the US debt ceiling continues and investors look to lock in the highest yields since November. 

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The Bank of Montreal is leading five issuers raising C$4.75 billion ($3.49 billion) in the Canadian dollar bond market this week, according to data compiled by Bloomberg. That was the highest level since the second week of January, when five companies valued C$5.5 billion in new bond deals.

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Tensions around the US debt limit spiked higher after Fitch Ratings on Wednesday warned the nation’s AAA rating could be at stake. Meanwhile, the overall yield in the Canadian corporate bond market hit 5.247 percent on Wednesday, the highest since early November, according to the Bloomberg index.

That’s not all that’s encouraging US dollar market miners right now: Traders are betting on at least one more Bank of Canada rate hike this year, which will hold its next monetary policy meeting on June 7.

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Brad Saunders, head of debt capital markets and syndication at Desjardins Securities, said issuers are “taking advantage of the increased demand and passing the debt ceiling headlines and the Bank of Canada on May 7.” 6″. “Investors are looking to deploy dollars with higher yields than were available in early May and most of April.”

Investors are scouring for new investment opportunities ahead of billions of coupon payments expected next month. For the first half of June, investors in the FTSE Canada Global Bond Index expect a payout of around C$13 billion, based on estimates submitted by bond dealers earlier this month.

BMO on Thursday raised $2 billion by valuing a five-year premium bail bond at the midpoint of its guidance calling for a spread of 168 to 170 basis points, according to people familiar with the matter. this problem. Inter Pipeline valued $750 million in seven-year bonds at 239 basis points against Treasuries, the people said.

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BMO, which sold a separately insured bond contract in pounds on Thursday, did not immediately respond to a request for comment. An Inter Pipeline representative also did not respond to a request for comment.

BMO most recently conducted a standard-sized transaction in Canadian dollars in January, raising $650 million in additional Tier 1 securities. Inter Pipeline’s most recent bond deal in Canadian currency took place in November.

Earlier this week, IGM Financial, FortisAlberta Inc. and Enbridge Inc. closed bond deals with a total volume of $2 billion, according to data compiled by Bloomberg.