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UPDATE 1-Canada's ultra-long bond attracts solid demand at C$750 mln auction
August 29, 2017 / 5:49 PM / 24 days ago

UPDATE 1-Canada's ultra-long bond attracts solid demand at C$750 mln auction

(Adds analyst quotes and details throughout)

By Fergal Smith

TORONTO, Aug 29 (Reuters) - Canada sold C$750 million of its ultra-long bond, the first reopening since November 2014, at an allotment yield of 2.220 percent, the Bank of Canada said after an auction on Tuesday.

The value of bids submitted by distributors of government securities for the 2.75 percent bond, which matures on Dec. 1, 2064, was more than C$2 billion to leave a bid-to-cover ratio of 2.72.

“There was pretty good demand for the bond,” said Jimmy Jean, senior economist at Desjardins Capital Markets.

Reopening of the ultra-long bond comes after the Bank of Canada raised interest rates last month for the first time in nearly seven years, pushing up borrowing costs for shorter-dated issues. Meanwhile, yields on longer-dated bonds have held at historically low levels.

“The government has chosen to seize on that opportunity,” Jean said.

The difference between the 2-year yield and the 30-year yield has narrowed by more than 50 basis points this year to a spread of 103 basis points.

Ultra-long bonds have a term to maturity of 40 years or more and are not as common as 30-year issuance. Canada is one of the few leading industrialized nations with an undisputed AAA rating, and its bonds are in high demand.

C$4.25 billion was outstanding on the 2064 bond after the auction. The low yield was 2.150 percent, while the median was 2.197 percent.

Details on Bank of Canada webpage: here (Reporting by Fergal Smith; Editing by Andrew Hay)

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