Canada set to sell its largest U.S. dollar bond since 2015

Canada is borrowing US$3.5 billion in its largest sale in the U.S. dollar bond market in more than six years.

Canada Will Price five-year bonds to yield six basis points over U.S. Treasuries, in line with its most recent sale in January 2020, according to people with knowledge of the matter.

The transaction received more than US$7 billion of orders, said the people, who asked not to be identified because the details are private.

The “bond provides funds to supplement and diversify Canada's liquid foreign reserves,” the Department of Finance said in a statement Monday before the terms of the deal were set.

The country, which retains top investment-grade ratings from two out of the three largest credit rating companies, is returning to the international debt markets for the first time since the start of the pandemic as its central bank adopts a relatively hawkish tone. Bank of Canada reduced the pace of its government bond purchases last month, and plans even less intervention later this year, according to projections by market analysts.

The central bank cut its federal government bond purchases by $1 billion to $3 billion per week in April, and may slow to $2 billion at its July monetary policy meeting and $1 billion in September, Laurentian Bank Securities' economists Sebastien Lavoie and Dominique Lapointe said in a note to investors Tuesday.

Canada's economy is expected to grow 6.1 per cent this year, up from a 5.4-per-cent decline in 2020, according to analysts' consensus compiled by Bloomberg.