Canada Borrowers Lean Into Callable Bonds as BOC Cuts on Horizon

CIBC, Pembina among recent Canadian issuers of 3NC1 bonds
Others may follow as pricing power shifts, iA’s Parker says

The CN Tower from Bay Street In the financial district in Toronto, Ontario, Canada, on Monday, Nov. 22, 2021. Corporate bond issuers in Canada are taking advantage of expected rate cuts in 2024 by selling debt with an option to repay investors as soon as next year. — The CN Tower from Bay Street In the financial district in Toronto, Ontario, Canada, on Monday, Nov. 22, 2021. Corporate bond issuers in Canada are taking advantage of expected rate cuts in 2024 by selling debt with an option to repay investors as soon as next year.
Photographer: Cole Burston/Bloomberg

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By Esteban Duarte

July 20, 2023 at 5:19 PM UTC

This article is for subscribers only.

Corporate bond issuers in Canada are taking advantage of expected rate cuts in 2024 by selling debt with an option to repay investors as soon as next year.

Canadian Imperial Bank of Commerce, Gibson Energy Inc. and Pembina Pipeline Inc raised a combined C$1.25 billion ($950 million) in the last month by selling bonds with a call option in 2024, according to data compiled by Bloomberg. More issuers may follow a similar path of selling these bonds — that frequently have final maturity in three years, labeled 3NC1 as shorthand, said Jason Parker, vice president and portfolio manager at Industrial Alliance Global Asset Management, which manages about C$102.7 billion of assets.