Maple market bellwether of a booming Canadian bond market, says RBC Capital Markets

Nearly two years after Canada’s elimination of the foreign investment limit on Canadian pension and retirement savings funds, the “Maple bond” market continues its dramatic growth and the larger Canadian bond market is evolving to an open global market. The result is accelerating change driven by investors seeking diversification and incremental yield, globalization, shrinking government bond supply and a myriad other factors, according to presenters at the annual RBC Capital Markets Global Fixed Income Conference, “The Evolution of a Global Market.”

The market for Maple bonds - which are issued by non-Canadian entities in the Canadian market and denominated in Canadian dollars - is among the topics at the third annual conference, which begins today and runs through Friday at the Four Seasons Hotel in Miami. Canadian corporate, government and structured issuers will also be prominently featured. Attendees will include nearly 200 institutional investors and bond issuers from the U.S., Canada, Europe and Asia.

Former Federal Reserve Chairman Alan Greenspan is the conference’s keynote speaker, with RBC President and CEO Gord Nixon scheduled to issue the conference’s opening remarks. Dr. Greenspan’s presentation is closed to the media.

“The repeal of the foreign investment limit, in July 2005, has helped spark the globalization of Canada’s bond market, bringing both opportunities and challenges to issuers and investors alike,” said Larry Bates, RBC Capital Markets Global Head of Debt Capital Markets.

Until July 2005, Canadian pension funds and retirement savings plans were required to have 70 percent of their assets invested in Canada. The repeal of that limit helped the Maple bond market grow from C$21.6 billion in 2005 to C$28.7 billion in 2006, a 33 per cent increase. And in the first quarter of 2007, a total of C$14.4 billion in debt was issued, putting the market on pace to double last year’s issuance.

“The growth in the Canadian debt market during the past couple of years has far exceeded expectations,” said Bates. “Most experts never thought it would take off as quickly as it has. We may not be completely global yet, but we are well on our way. The evolution of the Canadian bond market is clearly in full swing.”