Covered commodities as the demand for bonds at BNP sees $ 40 billion sales

The bonds sold by Canadian banks in U.S. dollars fetching a premium over those of other countries, as investors see the values as a relative haven of sovereign debt crisis turbulent Europe.

The bonds pay 49 basis points on average in reference points from 09 December, according to Bank of America Merrill Lynch data. That compares with 153 per U.S. dollar European covered bond issue, 189 British and 179 for Korean.

Canada has the lowest ratio of net debt to gross domestic product among the Group of Seven countries, drawing investors seeking safety, a rescue Irish taps 112 billion U.S. dollars in European and German Chancellor Angela Merkel is pushing for the holders bonds to be taken to help pay for the restructuring losses. Covered bonds, a market of $ 2.7 billion, are typically backed by mortgages or public sector loans.

"The really good news for covered bonds is the product is perceived as outside, both the concerns of sovereign debt and conversations" about sharing the load, said Derry Hubbard, director of marketing and execution of bonds BNP Paribas SA in London. Speaking at a Euromoney conference in New York on 9 December. "If you look at the Canadian market, margins are very reflective of how strong the offer is a safe haven."

'Back In'

U.S. dollar the issuance of bonds of Canadian lenders such as Bank of Nova Scotia and Canadian Imperial Bank of Commerce represented approximately half of the total 30 billion this year, and must "dominate" in 2011, said Heiko Langer, Senior Credit Analyst of covered bonds at BNP Paribas in London. It provides 30 billion U.S. dollars to $ 40 million in the issuance of next year.

"I hear a similar number" for the prognosis of BNP, Peter Walker, associate vice president of treasury management and balance in the TD Bank Group, said in an interview in New York. TD issued a bond to $ 2,000,000,000 in July covered. "People are waiting for Canadians to be back there, and maybe find some more issuers to come from Europe."

TD said Walker saved about 20 basis points in interest expense by issuing bonds in the U.S. compared with the issuance of senior debt in Canada. In a sale of debt of $ 2 billion, equivalent to annual savings of $ 4 million in interest costs.

Elsewhere in credit markets in Southern Pacific Resource Corp., the Canadian oil and gas, is seeking a loan of 275 million U.S. dollars to help fund within the STP-McKay oil sands project, according to a person familiar with the negotiations.

Alberta, Teranet

The Alberta Finance Authority to lend money to local school boards and municipalities sold C $ 250 million (248 million U.S. dollars) in a reoffering of floating rate notes in October 2012, bringing the total outstanding of $ C 450 million. The debt pays interest at a quarterly rate of Canada offers distributor or Cdor, plus 7 basis points, or 0.07 percentage point.

Teranet Holdings LP, which owns Unit Ontario electronic registration system for property, sold C $ 1.6 billion of debt in four parts, with maturities ranging from December 2015 to December 2040. Extends over the landmarks were 105 basis points for five years, 3,531 percent of the bonds, 192 basis points for 21 years, the debt of 3.27 percent, 150 basis points for 10 years, 4.807 for percent of the bonds and 200 basis points during the 30 - year, 5.754 percent of the debt.

Financement Quebec, which are loans on behalf of schools, universities and hospitals, will provide $ 100 million of floating rate notes due June 2016, bringing the total outstanding to C $ 1,530,000,000. The debt pays interest to Cdor quarterly, plus 27 basis points. Cdor three months ended last week at 1296 per cent, reaching its highest level since January 2009.

Corporate spreads

The extra yield investors demand to own corporate debt to investment grade Canadian more than the federal government declined to 142 basis points on Dec. 10, from 143 the previous week, according to the index of the Bank of America Merrill Lynch. Yields increased to 4.07 percent from 3.99 percent. Corporate bonds lost 1.05 percent this month.

The performance of Canada's benchmark 10-year government debt rose 12 basis points last week to 3.31 percent as the price of the value of 3.5 percent due June 2020 fell C $ 1 01 to C $ 101.56. The yield is up to 2.678 percent from October 12, the lowest level since March 2009. The bond yield 2 basis points less than similar U.S. Treasuries, down from 26 basis points in late November.

two-year Canadian bond yield 109 basis points more than the equivalent Treasury maturity, down from 117 on 30 November.

Provincial Bonds

In the provincial bond market, the relative yields were unchanged last week at 54 basis points. Yields increased to 3.35 percent from 3.27. The securities lost 1.2 percent in November, the biggest drop since December 2009 and have fallen 1.6 percent this month.

Covered bonds have a preferential claim on the underlying assets and a greater demand on the issuer in case of default. Canadian banks can only issue bonds equal to 4 percent of the assets of the balance.

Canadian banks are perceived as safe because they do not require government assistance during the financial crisis. The World Economic Forum has ranked the strongest in the world for three consecutive years. housing market in Canada has recovered from recession, with rising resale prices for 16 consecutive months before falling in September.

The issuance of $ 30 billion to $ 40 million next year "is not a reasonable level," said Andrew Kriegler, senior vice president and treasurer of Canadian Imperial Bank of Commerce in Toronto. CIBC sold 4.25 billion U.S. dollars of U.S. covered bonds This year, as well as smaller quantities in Australia and Switzerland.

"We see the U.S. dollar in the market for covered bonds as an important component of our financing plans in the future," said Kriegler. "The U.S. market is the largest single capital market in the world, and is right next to us."