WORKERS CAPITAL

British Columbia Pension Fund Joins AAA Bond Club at Expensive Time

Esteban Duarte
Mon, October 23, 2023 


(Bloomberg) -- British Columbia Investment Management Corporation, which manages C$233 billion ($170 billion) of assets mostly for public sector pensioners in the western province, priced its debut bond sale in Canadian dollars even as borrowing costs hover near historic highs.

The asset manager on Monday raised C$1.25 billion by selling 10-year bonds at a spread of 90.5 basis points over similar tenor government securities, according to people with knowledge of the matter. The notes are expected to garner the highest investment-grade designation by three ratings companies, including Moody’s Investors Service.

Canada’s 10-year government bond yields are at 4.01% — or just about 23 basis points from their highest since 2007 — and compare to an average yield of 3.3% in the last year, Bloomberg-compiled data show. Central banks may be forced to keep interest rates at the highest level in decades for longer than expected as inflation remains above target levels. A representative at BCI declined to comment.

BCI is following other pension plans in adding bond programs to their arsenal for more flexibility to implement investment strategies.

Canada Pension Plan Investment Board, a regular issuer whose debt is also top rated, sold C$1 billion of 10-year bonds on Sept. 26 at a spread of 78 basis points over the benchmark, Bloomberg-compiled data show. The 4.75% CPPIB notes were quoted at a spread of about 78.5 basis points on Monday, according to Bloomberg indicative bid prices.

(Updates to say deal is priced.)

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