Posted on 19 March, 2010 | 78 Comments
Canada Housing Trust, the financing arm of the nation’s housing agency, is poised to sell $6-billion (US$5.9-billion) in mortgage bonds at the lowest relative yields since before the credit markets seized up in 2007.
Canada Housing said Wednesday it will sell five-year, 2.5% bonds maturing in March 2015. The debt may price about 18 basis points above Canada’s 2.5% bonds maturing in June 2015. That would be the lowest spread on a new Canada Housing issue since June 2007, when the agency paid a spread of 14 basis points. Since then, spreads have ranged from 21 to 65.5 basis points.
Borrowing costs are falling to levels last seen in the second half of 2007 when the global credit crisis began. The Bank of Canada has pledged to leave its key overnight rate at a record low 0.25% through June unless the inflation outlook shifts.
Canada Housing Trust began selling bonds in 2001 to ensure enough liquidity in the market for residential mortgages, which lowers the cost of home financing. The trust has about $176-billion of debt outstanding, including $161-billion in fixed- rate bonds and $15-billion of floating-rate notes.
Elsewhere in credit markets, Moody’s Investors Service estimated about US$75-billion worth of Canadian corporate debt will come due in the next five years compared with almost US$1.4-trillion in the U.S., Prince Edward Island plans to sell debt and spreads on Canadian corporate debt narrowed to the least in more than two years.
About US$45-billion, or 60%, of the debt Canadian companies need to refinance in the next five years is investment grade, compared with 40% in the U.S., Moody’s said in the report. Annual amounts range from US$4-billion due this year to US$25-billion in 2014.
“The modest amount of debt due over the next five years in Canada is due to less leveraged buyout activity prior to 2007 than in the U.S. and lower debt levels heading into the cycle,” Kevin Cassidy, senior credit officer at Moody’s in New York, said in the statement.
PEI, Canada’s smallest province about 860 miles northeast of New York, plans to sell $200-million of 4.65% bonds maturing in November 2037 at 78.5 basis points above the Canadian government 5% bond due in 2037.
The extra yield investors demand to own the debt of Canadian companies instead of governments narrowed yesterday to 117 basis points, the tightest since November 2007 and down from 134 basis points at the end of 2009, according to Bank of America Merrill Lynch index data.
Canada’s mortgage rates are close to the lowest since the Korean War, spurring home sales and prices as the country emerges from a recession. Housing starts rose to the highest since October 2008 in February, and government-owned Canadian Mortgage and Housing Corp. predicted on March 2 housing starts will rise this year and next.
August 5th, 2010 at 12:11 pm
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