BUSINESS

Bond markets acquire a taste for maple

KATE LUNAU December 10 2007
BUSINESS

Bond markets acquire a taste for maple

KATE LUNAU December 10 2007

Bond markets acquire a taste for maple

KATE LUNAU

Canadian-denominated bonds are enjoying a surge in popularity, and Maple Bonds are no exception. The Maple Bond Market—which exploded in 2005 after certain government restrictions were eased— is where foreign borrowers raise and settle debt in Canadian dollars. And now one of the world’s foremost issuers is on board. On Nov. 20, the World Bank (also known as the International Bank for Reconstruction and Development) priced an $850-million, fiveyear AAA-rated offering, the first to be offered in Canadian dollars under the bank’s global debt issuance facility.

“The World Bank is a terrific addition,” says Kevin Foley, managing director of fixed income at Scotia Capital. Although it’s just one of several large institutions—ranging from banks to foreign government bodies—to issue to the Maple Market, the World Bank’s presence is welcome nonetheless, Foley says: “They’re a high-quality borrower that is scarce in the capital market.” And while he believes the strong dollar isn’t the driving force behind Canadian-denominated bonds’ current popularity (he points to falling interest rates instead), if the dollar stays strong, it will only boost interest even more, he says.

Perhaps the most welcome part of the World Bank’s entry into the Maple Market is its timing. As there’s been less new issuance lately due to a credit crunch, it could help “reopen the Maple Market and develop it further,” Foley says. “The fact that they chose

Canada for a benchmark transaction says a lot about Canadian investors and the resilience of the Maple Market.” Already, Maple Bonds have been a success story. Representing one-quarter of total corporate issue in Canada, the Maple Market was worth a total of $66 billion as of Oct. 2007 And as Maple Bonds work to keep up with similar markets in other nations—Kangaroo Bonds in Australia, Samurai Bonds in Japan—the World Bank’s presence can only help. M