Wednesday, March 19, 2008

Canada Housing Trust sells $11-billion of debt

For all the bad things being said about lending money to home buyers, Canada's mortgage market showed Wednesday that it remains an attractive place to invest.

The Canada Housing Trust raised $11-billion - it's single largest bond issue - by selling government-backed Canada Mortgage Bonds to both foreign and domestic buyers. The lion's shae of this came in a $9-billion issue of five-year debt led by TD Securities. It was sold with a promise of 3.6 per cent interest, which translate into a 58 baisis point premium over the comparable government debt. CIBC World Markets, Merrill Lynch, Scotia Capital and RBC Dominion Securities were also on board.

Asian central banks were among the buyers of this debt, and a total of 22 per cent of the offering went to foreign buyers. The government backstop, combined with slightly higher yields, makes this the kind of bonds investors target when folks start talking about a flight to quality.

Canada Housing Trust, a subsidiary of the Canada Mortgage & Housing Corp., also sold $2-billion more of an existing, three-year bond, with Merrill Lynch leading that five-dealer syndicate. The debt was priced at a 67.5 basis point premium to the benchmark government bond.

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