Manulife drops Alberta for B.C.

Manulife Asset Management, the investment arm of Canada’s largest insurer, swapped most of its Alberta bonds for British Columbia debt amid concern the province’s coffers will be slow to recover from historic floods.

TORONTO — Manulife Asset Management, the investment arm of Canada’s largest insurer, swapped most of its Alberta bonds for British Columbia debt amid concern the province’s coffers will be slow to recover from historic floods.

The $965 million Manulife bond fund reduced its allocation of debt from the nation’s foremost oil-producing region to 2.2 per cent from the 4.9 per cent it held June 10, while raising its exposure to British Columbia to 10 per cent from nine per cent.

“British Columbia is in much better shape than Alberta at this time,” Terry Carr, who helps oversee $16 billion as head of Canadian fixed-income at Manulife. “In the near-term, they are in a surplus situation, while Alberta is going to be in a deficit situation.”

Alberta’s government committed $1 billion to pay for relief from the worst flood in the province’s history as Premier Alison Redford said plans to balance the provincial budget next year would be delayed. Insured losses to the province from the June flooding may total $2.25 billion to $3.75 billion, according to Bank of Montreal.

Uncertainty over the negative financial impact on the province, including its top credit rating and ability to meet its budget goals, is keeping Manulife away, Carr said.

Alberta bonds returned 0.5 per cent through July 18 from June 21 when the province evacuated 75,000 people as water levels rose, while British Columbia bonds gained 0.9 per cent, according to Bank of America Merrill Lynch data. British Columbia 10-year bonds outperformed comparable Alberta debt by one to four basis points since June 10, Carr said.

Flooding in Calgary, where most of Canada’s oil companies are headquartered, and the province’s south will slow growth to 2 per cent from a previously forecast 2.5 per cent, Michael Gregory, senior economist in Toronto at BMO, said in a July 2 note to clients.

As Alberta and its insurers tally the costs of flooding damage, oil-sands companies are grappling with the challenges of bringing rising crude production to market amid delays in pipeline projects such as TransCanada Corp.’s $5.3 billion Keystone XL. Canadian energy companies have underperformed U.S. peers by 55 percentage points on Standard & Poor’s indexes during the past three years as Western Canada Select oil prices averaged $19.53 a barrel less than the U.S. benchmark, according to data compiled by Bloomberg.

Elsewhere in credit markets, the extra yield investors demand to own the debt of Canadian investment-grade corporations rather than the federal government widened last week to 124 basis points, or 1.24 percentage points, from 123 basis points on July 12, according to the Bank of America Merrill Lynch Canada Corporate Index. Yields fell to 3.09 per cent on July 19, from 3.15 per cent a week earlier.

Spreads on provincial bonds expanded to 72 basis points, from 71 the week before, according to Bank of America’s Canadian Provincial & Municipal Index. Yields fell to 2.88 per cent, from 2.93 per cent on July 12, Bank of America index data show.

Provincial securities have lost 1.9 per cent this year, while federal-government bonds have dropped 1.7 per cent, the data show. Corporate bonds have risen 0.3 per cent.

British Columbia has a “low debt-to-gross domestic product ratio, balanced budgets for the next few years, liquidity” and the bonds are “not too expensive from a relative yield spread comparison,” Manulife’s Carr said.

British Columbia has pledged to balance its budget after the Liberal Party defeated the New Democratic Party in the May 14 election. Premier Christy Clark said she intends to raise taxes on companies and high earners, control spending, and sell some government assets, according to budget documents.

British Columbia, with a population of 4.6 million, and Alberta, which sits on the world’s third-largest pool of crude reserves are the only two among 10 Canadian provinces with top ratings from Moody’s Investors Service and Standard & Poor’s.

Alberta said in its March 8 budget it planned to sell $7.34 billion of debt this fiscal year, an increase of 23 per cent over the previous fiscal year and the most borrowing since 1986 in nominal terms, according to data provided by the finance ministry, as the province heads for its sixth straight deficit. The province has $17.9 billion of bonds outstanding, according to Bloomberg data.

“It could present a buying opportunity in the future,” Carr said. “But we would be a little hesitant to get too far in front of that by overweighting it much more today. That’s until we get a better sense of how much borrowing they’ll have to do.”

Just Posted

The City of Red Deer sits at 249 active cases of the virus, after hitting a peak of 565 active cases on Feb. 22. (Black Press file image)
Red Deer down to 119 active COVID-19 cases

Province identifies 179 new cases Saturday

Red Deer Emergency Services responded to an explosion at a duplex on Rupert Crescent Saturday morning. (Photo by Sean McIntosh/Advocate staff)
Firefighters respond to explosion in Red Deer early Saturday morning

There was an explosion at a Red Deer duplex early Saturday morning.… Continue reading

Terry Betts, of Kananaskis, looks at the vehicle he was hoping to sell during the Quick Times Red Deer Swap Meet in the Westerner Park parking lot Saturday. (Photo by Sean McIntosh/Advocate staff)
Quick Times Red Deer Swap Meet held outdoors

A big automotive swap meet was held outdoors this year in Red… Continue reading

The Alberta Sports Hall of Fame and Museum is set to re-open on July 2. (File Photo)
Alberta Sports Hall of Fame and Museum to reopen Monday

The Alberta Sports Hall of Fame and Museum will reopen for visitors… Continue reading

Huzaifa (left), Saif (middle) and Zoya (right) were among the 60 or so Red Deerians who participated in a vigil for the victims of a recent terrorist attack that killed four people in London Ont. (Photo by BYRON HACKETT/Advocate Staff)
Red Deer vigil honours victims of London, Ont. terrorist attack

About 60 people gathered at the corner of 49 Ave. and 50… Continue reading

A man wears a face mask as he walks by a sign for a COVID-19 vaccination site in Montreal, Sunday, May 16, 2021, as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
Canada paid a premium to get doses from Pfizer earlier than planned

OTTAWA — Canada paid a premium to get more than 250,000 doses… Continue reading

The Kamloops Indian Residential School in Kamloops, B.C., is shown in this 1930 handout photo. HO — Deschatelets-NDC Archives
Calls grow for Ottawa to review settlement decisions for residential school survivors

Lawyer Teri Lynn Bougie still cries when she talks about the final… Continue reading

Syringes are readied at a COVID-19 mobile vaccination clinic for members of First Nations and their partners, Friday, April 30, 2021 in Montreal. Most of the federal contracts for COVID-19 vaccines allow for Canada to donate some of its doses to other countries or international aid organizations and in at least three cases, for the doses to be resold.THE CANADIAN PRESS/Ryan Remiorz
Canada’s vaccine contracts allow for doses to be donated, in some cases resold

OTTAWA — Most of the federal contracts for COVID-19 vaccines allow for… Continue reading

Grand Chief Stewart Phillip, President of the Union of British Columbia Indian Chiefs, responds to the report on the National Inquiry into Missing and Murdered Indigenous Women and Girls, in Vancouver, on Monday June 3, 2019. As stories of the horrors of residential schools circulate after the Tk'emlups te Secwepemc First Nation announced it had located what are believed to be the remains of 215 children, Grand Chief Stewart Phillip of the Union of B.C. Indian Chiefs said he feels a connection with the former students. THE CANADIAN PRESS/Darryl Dyck
Two sides of the same coin: Ex-foster kids identify with residential school survivors

VANCOUVER — As stories of the horrors of residential schools circulate after… Continue reading

A woman sits and weeps at the scene of Sunday's hate-motivated vehicle attack in London, Ont. on Tuesday, June 8, 2021. Four members of a family in London, Ont., are set to be buried today. The public has been invited to help celebrate the lives of Talat Afzaal, 74, her son Salman Afzaal, 46, his wife Madiha Salman, 44, and their 15-year-old daughter Yumna Salman.THE CANADIAN PRESS/ Geoff Robins
Funeral to be held today for London family killed in attack

LONDON, Ont. — Four members of a Muslim family killed in what… Continue reading

Canadian Prime Minister Justin Trudeau and United States President Joe Biden listen to United Kingdom Prime Minister Boris Johnson deliver opening remarks at a plenary session at the G7 Summit in Carbis Bay, United Kingdom Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Trudeau to discuss foreign policy with G7 leaders at second day of summit meeting

CARBIS BAY, CORNWALL, ENGLAND — Foreign policy is on the agenda for… Continue reading

Multivitamins are shown on the packaging line at the Pfizer plant in Montreal, Thursday, July 12, 2012. THE CANADIAN PRESS/Graham Hughes
Canadian drug companies want new pricing regs delayed again until after pandemic

OTTAWA — Almost three dozen Canadian pharmaceutical companies made a direct appeal… Continue reading

In this file photo, a lotto Max ticket is shown in Toronto on Monday Feb. 26, 2018. (By THE CANADIAN PRESS)
No winning ticket for Friday’s $70 million Lotto Max jackpot

TORONTO — The massive $70 million dollar Lotto Max jackpot remained unclaimed… Continue reading

Most Read