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Canadian bonds beat peers by most in five years
Canadian bonds are outperforming global counterparts by the widest margin in half a decade as debt turmoil and concern the U.S. recovery is stalling send investors to nations with the soundest balance sheets.
Bonds issued by Canadian governments and companies returned 2.21% last month, led by Rogers Communications Inc., Epcor Utilities Inc. and Quebec, according to a Bank of America Merrill Lynch index tracking 1,179 bonds with $1.1 trillion outstanding. That compares with a gain of 1.16% in Merrill’s broad global index. The gap of 1.04 percentage points is the widest since July 2006.
“Canada’s a pure AAA that’s attractive to foreign reserve managers,” said James Dutkiewicz, a fund manager who oversees about C$7 billion in bonds at CI Financial Corp. in Toronto. “It has a stable, strong currency and a weak enough economy that continues to delay Bank of Canada tightening.”
International investors are purchasing Canadian bonds at a record pace, pushing the country’s currency to the strongest in almost four years. Canada’s debt is 34% of gross domestic product, about a third of the U.S. ratio at 94%. Germany’s debt-to-output ratio is 83%, the U.K.’s is 149% and Japan’s is 226%.
Standard & Poor’s, which has given the U.S. a top AAA ranking since 1941, said on July 14 that the chance of a downgrade is 50% in the next three months and may cut the rating as soon as August if there isn’t a “credible solution” to reduce the nation’s deficit.
Narrowing Deficit
Canada’s 2011 fiscal plan, released June 6, projects a deficit of $36.2 billion for the fiscal year that ended in March, down from an initially projected $40.5 billion, because of lower program spending. The deficit is projected to swing to a surplus of $4.2 billion for the 2015 fiscal year.
Elsewhere in credit markets, the extra yield investors demand to hold the debt of Canada’s corporations rather than its federal government ended last week at 133 basis points, one basis point wider than in the prior week. Canadian markets were closed yesterday for a holiday. The nation’s corporate bonds have returned 2.15% in July, compared with 2.29 percent for U.S. company debt.
“Canada, and especially the Canadian financial sector, is still operating under a bit of a halo effect, since our economy and especially our banks came through the credit crisis so well,” said Robert Follis, managing director of corporate bond research at Scotia Capital in Toronto. “When the broad economy gets into a bit of trouble, Canada and the Canadian corporate issuers look pretty good.
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Bonds issued by Canadian governments and companies returned 2.21% last month, led by Rogers Communications Inc., Epcor Utilities Inc. and Quebec, according to a Bank of America Merrill Lynch index tracking 1179 bonds with $1.1 trillion outstanding.
In January, American Water agreed to sell its Arizona and New Mexico water and wastewater businesses to Epcor Utilities Inc. for $470 million, a move to raise funds for equity and debt financing. Shares of American Water closed Friday at $30.16 and
With the additional common shares from the exercise of the over-allotment option, Capital Power's total number of common shares, on a fully diluted basis, is 97061213 in which EPCOR Utilities Inc. has a 48.9% indirect ownership.
Canadian bonds beat peers by most in five years | Investing ...
Canadian bonds are outperforming global counterparts by the widest margin in half a decade as debt turmoil and concern the U.S. recovery is stalling send investors to nations with the soundest balance sheets.
Bonds issued by Canadian governments and companies returned 2.21% last month, led by Rogers Communications Inc., Epcor Utilities Inc. and Quebec, according to a Bank of America Merrill Lynch index tracking 1,179 bonds with $1.1 trillion outstanding. That compares with a gain of 1.16% in Merrill’s broad global index. The gap of 1.04 percentage points is the widest since July 2006.
“Canada’s a pure AAA that’s attractive to foreign reserve managers,” said James Dutkiewicz, a fund manager who oversees about C$7 billion in bonds at CI Financial Corp. in Toronto. “It has a stable, strong currency and a weak enough economy that continues to delay Bank of Canada tightening.”
International investors are purchasing Canadian bonds at a record pace, pushing the country’s currency to the strongest in almost four years. Canada’s debt is 34% of gross domestic product, about a third of the U.S. ratio at 94%. Germany’s debt-to-output ratio is 83%, the U.K.’s is 149% and Japan’s is 226%.
Standard & Poor’s, which has given the U.S. a top AAA ranking since 1941, said on July 14 that the chance of a downgrade is 50% in the next three months and may cut the rating as soon as August if there isn’t a “credible solution” to reduce the nation’s deficit.
Narrowing Deficit
Canada’s 2011 fiscal plan, released June 6, projects a deficit of $36.2 billion for the fiscal year that ended in March, down from an initially projected $40.5 billion, because of lower program spending. The deficit is projected to swing to a surplus of $4.2 billion for the 2015 fiscal year.
Elsewhere in credit markets, the extra yield investors demand to hold the debt of Canada’s corporations rather than its federal government ended last week at 133 basis points, one basis point wider than in the prior week. Canadian markets were closed yesterday for a holiday. The nation’s corporate bonds have returned 2.15% in July, compared with 2.29 percent for U.S. company debt.
“Canada, and especially the Canadian financial sector, is still operating under a bit of a halo effect, since our economy and especially our banks came through the credit crisis so well,” said Robert Follis, managing director of corporate bond research at Scotia Capital in Toronto. “When the broad economy gets into a bit of trouble, Canada and the Canadian corporate issuers look pretty good.