Nov. 13 (Bloomberg) -- Caisse de Depot et Placement du Quebec, Canada’s biggest pension-fund manager, plans to sell as much as C$8 billion ($7.6 billion) of bonds in Canada, the U.S. and Europe by the end of 2010.

The bond sales would replace part of Caisse’s short-term borrowing program with longer-term debt and won’t increase leverage, Montreal-based Caisse said today in a statement. Foreign-currency-issued debt will reduce the need to hedge against swings in the Canadian dollar, it said.

“They’ve had a short-term borrowing program and they may want to extend it out to fix it, which is understandable given the low interest-rate environment,” said Benoit Lalonde, vice president of fixed income at Laurentian Bank of Canada in Montreal. “I would imagine there’s an issue coming soon.”

The Caisse, which oversaw C$120.1 billion after reporting a record loss of C$39.8 billion for 2008, is set to post a return on investments of about 5 percent to 6 percent this year, compared with an average gain of 10 percent to 12 percent for Canadian pension funds, La Presse newspaper reported on Nov. 11, citing unidentified people familiar with the matter.

The Bank of Canada held its benchmark interest rate at a record low 0.25 percent at its Oct. 20 meeting and pledged to keep it there through June 2010, barring changes in the outlook for inflation.

Commercial Paper

CDP Financial Inc., the Caisse’s financing arm, will carry out the sales in series with terms up to 30 years, DBRS Ltd., a Toronto-based rating company, said in a statement. Proceeds will be used to “significantly reduce” the amount of commercial paper outstanding, DBRS said. It expects the debt to be AAA, its highest rating, pending a review of final documents.

“Investors will consider that paper similar to senior bank debt,” Lalonde said. “The Caisse de depot is not an institution that’s in any danger of folding.”

Caisse will “meet with several investors in the weeks to come,” spokesman Maxime Chagnon said in an interview. He wouldn’t comment on timing of the debt sales.

“Because of today’s historically low interest rates it’s a good time to lock in” long-term financing, he said.

The refinancing will provide “better asset-liability term matching” for the Caisse’s U.S. real-estate portfolio and other assets, DBRS said.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

Last Updated: November 13, 2009 10:36 EST