Wednesday, February 18, 2009

Ottawa flogs mortgage bonds

By Andrew Willis (Globe & Mail Streetwise):

Ottawa is pumping out bonds to back the residential real estate market, with the Canada Housing Trust expected to sell $3.5-bilion of new debt this week.

As the federal government expands it mortgage insurance program, the Canada Housing Trust announced Tuesday that it will sell an additional $2.5-billion of 10-year Canada Mortgage Bonds, and launch a new $1-billion five-year floating rate note.

The 10-year offering of bonds with a 4.1-per-cent coupon is to be priced Wednesday, and TD Waterhouse said in a report that the debt is expected to be priced at a premium of 57 basis points to the comparable government bonds. Deutsche Bank, CIBC World Markets, BMO Nesbitt Burns and RBC Dominion Securities are leading the offering.

The Canada Housing Trust floating rate notes were priced Tuesday at 50 bps over the benchmark short-term rate. That financing was led by CIBC World Markets, Merrill Lynch, BMO Nesbitt Burns and RBC Dominion Securities.

Canada Mortgage Bonds were created in 2001 by the CMHC and have proven a hit with investors, as they offer a federal government guarantee on securities that pay far higher rates than government debt. There are more than $136-billion of these bonds now outstanding.

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