Canadian Bond Market Sees Significant Decline Amid Concerns over Federal Budget and Foreign Investor Selling

Strategic Insights -

The Canadian bond market experienced a significant decline yesterday, with prices falling across various bond issues. The decline was attributed to concerns over the upcoming federal budget and selling pressure from foreign investors. The Canadian dollar also slipped to near seven-year lows, further contributing to the market's nervousness.

Key Takeaways:

  • The Canadian bond market saw a significant decline, with prices falling on the short and long ends of the yield curve.
  • The decline was attributed to concerns over the upcoming federal budget and selling pressure from foreign investors.
  • The Canadian dollar slipped to near seven-year lows, further contributing to the market's nervousness.
  • Much of the selling was believed to have come from foreign investors.
  • Multiple large bond issuances were announced, including a $1 billion Euro medium-term note program by Hydro-Quebec.
  • The U.S. bond market was relatively calm, with the U.S. Treasury bond trading in a narrow range and finishing mixed.
  • Selected quotations from RBC Dominion Securities showed significant price movements across various bond issues, with yields changing as much as 0.650-0.750% in a single day.
  • The closely watched 8-per-cent Canada maturing June 1, 2023, slipped 65 cents to 108.2, with its yield rising to 7.32%.
  • Foreign investors' selling pressure was significant, with new supply and future budget concerns also contributing to the market's decline.
  • Large bond issuances, including a $250-million issue of subordinated debentures by CIBC, were also announced, further pressuring the market.

Statistics:

  • The Canadian bond market saw prices fall from 20 cents on the short end to as much as 75 cents on the long end.
  • The yield on the 8-per-cent Canada maturing June 1, 2023, rose to 7.32%.
  • The value of the Canadian dollar slipped to near seven-year lows.
  • Hydro-Quebec's $1 billion Euro medium-term note program was announced, which will carry maturities of one month or more and will be listed on European stock exchanges.
  • A $250-million issue of subordinated debentures by CIBC was announced, with the 7.1-per-cent debentures priced at 99.75 for a yield of 7.135 per cent.
  • The price change of the 8-per-cent Canada maturing June 1, 2023, was 65 cents, with the yield increasing by 0.650%.

Sources:

  • RBC Dominion Securities
  • Cambridge Shopping Centres
  • CIBC
  • Hydro-Quebec