Provinces selling bonds to beat rising yields

• Canadian provinces have rolled out a flurry of bond sales as they scramble to lock in borrowing costs before a global-market rout intensifies.

Five of Canada’s 10 provinces sold bonds last week, raising $ 2.55 billion. That boosted last month’s total to the largest for a November since 2012, according to data compiled by Bloomberg. The country’s oil-rich province of Alberta followed up its Canadian dollar issue with the sale of US$2.25 billion of U.S. dollar bonds on Thursday.

The rise in last week’s issuance f rom Canadian provinces is to some extent seasonal: their fiscal situation is clearer as they’ve published fall budget updates while an accumulation of coupon payments and maturities of federal government bonds left investors with cash to spend. A sell-off which sliced US$ 1.7 trillion in value from global markets in November added urgency to the sales.

“For issuers viewing the recent backup in rates as a precursor to even higher yields ahead, there’s financial incentive to raise money in the here and now,” said Warren Lovely, the Torontobased head of public- sector research and strategy at Na- tional Bank Financial Inc. “In a world of heightened geopolitical risks, provincial issuers have learned to jump through issuance windows when they’re open.”

Provinces pushed out sales as the Bloomberg Barclays Global Aggregate Total Return Index fell four per cent in November, the biggest slump since the gauge’s inception in 1990. Canadian bond markets weren’t immune as investors bet Donald Trump would unleash a wave of stimulus that would fuel inflation and higher interest rates. Provincial and municipal government bond prices fell 2.5 per cent in November, the worst monthly performance since 1994, according to a Bank of America/Merrill Lynch index.

The window of opportunity may be closing soon with uncertainty expected to rise before central bank decisions on interest rates in Canada on Dec. 7 and the U. S. Federal Reserve on Dec. 14.