Borderless bond market draws Canadian companies south to issue
TORONTO — Home may be where the heart is for Canadian companies, yet the U.S. bond market is increasingly where their head’s at.
Canadian companies have issued about US$69 billion of debt in U.S. markets this year, up 12 percent from a year ago. That compares with about $93 billion in the domestic market, a similar amount — US$70 billion — when adjusted for currency, and a three per cent decline from 2015. The move south is being driven by the lure of lower borrowing costs in America’s far larger market, where the high-quality debt of Canadian companies is being lapped up.
The downside for Canadian investors is that deals done south of the border are frequently sold to U.S. investors first. Canadians must wait until those U.S. bond buyers start to sell their notes in the secondary market, which can mean losing out when prices of newly issued bonds rise. Companies meanwhile are chasing the best terms, regardless of geography.
“We’re physically located in this particular pond but we’re quite a big shark,” Steve Roder, chief financial officer of Manulife Financial Corp., said by phone. “So it’s quite helpful to have other opportunities.”