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Canada Sells Dollar Bond at Higher Yield Than Local Sales

Esteban Duarte

(Bloomberg) -- Canada priced a five-year bond deal in U.S. dollars at a higher yield than equivalent issues in the domestic market as the federal government seeks to diversify its funding sources.

The top rated nation issued a $3 billion of bonds at 6 basis points over the U.S. Treasury yield, according to data compiled by Bloomberg. That’s equivalent to a yield in loonies of around 1.91% and compares with 1.60% for Canada’s five-year bonds denominated in the country’s own currency, according to data compiled by Bloomberg.

BNP Paribas SA, Canadian Imperial Bank of Commerce, HSBC Holdings Plc., Royal Bank of Canada and Toronto Dominion Bank arranged the deal. Canada last sold bonds in U.S. dollars a year ago, when it priced $3 billion of 2022 bonds at a spread of 10 basis points, or a yield of 2.633%, the data show.

The new bond will supplement Canada’s foreign exchange reserves and diversify its sources of financing, an Ottawa-based press officer at Canada’s Department of Finance said in an email. These funds will not be used for other kinds of government financing or program spending, which are raised exclusively through domestic borrowing programs, she said.

By comparison, Royal Bank of Canada issued $1 billion of fixed rate three-year senior bail-in bonds at a spread of 38 basis points over U.S. Treasuries, equivalent to a yield of about 2.15%. While there isn’t a direct comparison in the domestic market, a similar duration security issued by rival Bank of Nova Scotia yields 2.31%, data compiled by Bloomberg show.

(Adds pricing terms in 2nd paragraph.)

--With assistance from Allan Lopez.

To contact the reporter on this story: Esteban Duarte in Toronto at eduarterubia@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Jacqueline Thorpe

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