The Canada Mortgage and Housing Corporation (CMHC) complex in Ottawa on Thursday Oct. 9, 2008.Sean Kilpatrick/The Globe and Mail
Canada Mortgage and Housing Corp. launched a bond sale Tuesday with a minimum goal of raising $3-billion for the Crown corporation, and ended up raising $5.25-billion on Wednesday from a financing that caught the attention of yield-hungry investors.
The CMHC tapped its triple-A rated Canada Mortgage Bond program and sold $2.5-billion of 10-year bonds, up from an original expectation of $2-billion, and $2.75-billion of five-year floating rate debt, well above the $1-billion minimum set when the auction began on Tuesday. The 10-year bonds pay 1.9-per-cent interest and the floating-rate debt pays an interest rate that is 14 basis points above the benchmark government of Canada short-term interest rate. There are 100 basis points in a percentage point.
The CMHC stages a bond sale every three months, and this week's financing was its first offering since Britain roiled credit markets in June by voting to exit the European Union. Sources working on the transaction said international investors accounted for approximately a third of Canada Mortgage Bond buyers this week, a level of interest that was in line with previous bond sales. In 2015, 31 per cent of CMHC bonds went to foreign buyers, with 5 per cent purchased by European investors.
Financiers working on the CMHC transaction said there has been an increase in the number of foreign investors inquiring about triple-A rated Canadian debt that offers positive yields as interest rates go negative on bonds offered by other triple-A rated countries, such as Germany. At the same time the CMHC was pricing its debt offering on Wednesday, the Bank of Canada sold $3.7-billion of five-year government of Canada bonds that offer a 0.75-per-cent interest rate.
TD Securities, National Bank Financial, CIBC World Markets and RBC Capital Markets led the Canada Mortgage Bond offering.
Andrew Willis