Provincial bonds turn heads
August 11, 2011 (Edmonton Journal) -- Canada’s provincial bonds, trading at the biggest discount relative to federal bonds in a year, are attracting investors after the Standard & Poor’s downgrade of U.S. debt sparked a sell-off in risk assets. Relative yields on the 391 bonds in the Bank of America Merrill Lynch Canadian Provincial and Municipal Index, which has about $478 billion outstanding, averaged 64 basis points higher than comparable federal yields Tuesday, the most since July 2010, as government bond yields traded at almost record lows. Stocks plummeted globally and bonds rallied Monday, the first day of trading after S&P cut its credit rating on U.S. Treasuries.
“In the fear and panic of what happened, there are some great opportunities,” Ric Palombi, a money manager at McLean & Partners Wealth Management Ltd., said from Calgary. “When you look at the yield pickup over Government of Canada, the type of balance sheets that some of the provinces have and the issuance, clearly it’s positive for provincial yields.”
