Foreign companies are selling debt into the Canadian bond market at levels not seen since 2007, with $4.85-billion worth of maples sold in May alone. AT&T Inc. rounded out the month with a $1.35-billion dual tranche offering on May 17. That followed significant bond issues in Canadian currency from United Parcel Service Inc., Anheuser-Busch Inbev Finance Inc. and PepsiCo Inc.
The sheer amount of capital companies are raising in Canadian dollars – $9.7-billion so far this year, compared with around $6.5-billion for all of last year – isn't the only story. There's also been a notable shift toward offerings from non-financial companies, along with a lengthening of the terms being offered and a diversification of rating categories.
Last year, non-financials made up 15.5 per cent of the total maple bonds sold, according to Jean-François Godin, vice-president and principal analyst of Desjardins Securities Inc. This year, non-financials such as UPS and PepsiCo, both freshman players in the maples market, account for slightly more than 50 per cent of issues.
"These companies are active in Canada, and the names are well-known, and it's a well understood business. So for investors it was a good opportunity to diversify," Mr. Godin said.
The diversity of offerings has been highly appealing to investors, said Greg Jeffs, chief investment officer with fixed-income firm Algonquin Capital.
"From a Canadian investor's perspective you get access to global businesses, in Canadian dollars, and an opportunity to diversify your portfolio. If you look at some of the names that have come, really there isn't a comparable in the Canadian market," he said.
The larger bond issues – which have averaged $804.2-million so far this year, compared with an average of $716.7-million in 2016 – are also enticing investors by creating "a very robust secondary market," Mr. Jeffs added.
"There's far more liquidity and far more clients involved, so dealers have a broader base of clients to try to trade bonds with. … Also, there's a lot more focus on international levels, for example monitoring where bonds are trading in the U.S. and having more comfort where they should be in Canada."
For the companies themselves, the economics of the maple market are compelling, especially for U.S. corporations, Mr. Godin of Desjardins said. Some need cash for Canadian operations. Others are looking to make gains on currency swaps.
"We're not talking about a huge differential," Mr. Godin said. "They will pay, considering commission and everything … probably just slightly less than in the U.S. It's not major, but it could be enough to entice someone to tap the market here."
He's not expecting to see much interest from European companies, however. "I don't think the math works for them. … We may see some issuers willing to pay up, but I'd be very surprised."
Mr. Jeffs pointed to a third possible reason companies may be getting into the maples market.
"There's more desire after the financial crisis to diversify your funding sources. … Partially because it can be cost-effective, depending on the swapped equivalents at the time, but also just to diversify your funding sources in case liquidity dries up somewhat in certain markets."
Both Mr. Godin and Mr. Jeffs agree it's too early to speak of a true renaissance of maples. This year's numbers may be the best ones posted since the financial crisis, but they're far shy of the $21.1-billion in maples sold in the first six months of 2007. Still, the number, size and diversity of issues does suggest things are moving in a positive direction.
"I still think we could see more, the appetite is there," Mr. Jeffs said. "I'm sure the banks are busy canvassing potential issuers."