Canada Rakes In $13 Billion of Orders for Its Record Dollar Deal

Esteban Duarte Wed, April 19, 2023, 5:51 PM EDT

(Bloomberg) — Canada got over $13.3 billion of investor orders for its largest transaction in the US currency on record, according to a person with knowledge of the matter, as the inversion in the Treasury yield curve continues diving.

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Debt arrangers for the top-rated country priced $4 billion of five-year notes at a spread of 11 basis points over US Treasuries, lower than preliminary price discussions Tuesday of around 14 basis points, said the person, who asked not to be identified. The order book doesn’t include potential demand from the deal’s managers, the person said.

The inversion in the Treasury yield curve has steepened for much of the past five weeks as economic data implies another interest rate hike from the Federal Reserve, which next meets on May 3. The extra yield of two-year over the five-year is at around 52 basis points, the widest inversion in more than a month.

“Rates in the belly of the curve have declined recently, offering issuers a more attractive all-in yield than the front-end due to the curve inversion,” said Gennadiy Goldberg, a New York-based senior US rates strategist at TD Securities. “Highly rated issuers are using the relative stability in the Treasury market to raise funds after a very quiet March.”

It marks Canada’s biggest federal government transaction in dollars — up from $3.5 billion previously in 2022 — Bloomberg-compiled data show. Earlier this month, the francophone province of Quebec priced a similar maturity bond at a spread of 34.6 basis points, while Ontario Teachers’ Finance Trust sold a $1.5 billion deal Tuesday at 58.6 basis points.

Read more: US Paychecks Are Outpacing Inflation, Giving Fed Fodder for Hike

The Ottawa-based government is committed to maintaining liquid foreign reserves at or above 3% of its nominal gross domestic product, according to a statement on Canada’s Department of Finance website Tuesday.

A representative for Canada’s Department of Finance didn’t respond to a request for comment.

–With assistance from Daniel Covello.

(Adds order book in first and second paragraphs)

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