Back Supersize me Province of Alberta goes large and issues first time benchmark euro denominated bond

Supersize me: Province of Alberta goes large and issues first-time benchmark euro-denominated bond | James Redpath | EP05

April 25, 2018 Print

Features the investment insights of James Redpath (JR), former fixed income portfolio manager, on the Alberta government’s first-time benchmark euro-denominated bond issuance. JR answers why they issued a bond four to five times the average deal size in Canada, and what it may mean for the overall Canadian debt market.

Highlights include:

  • How issuing in euro currency alleviates the pressure on the Canadian market
  • The definition of a “benchmark” bond issuance
  • An example of the AB government’s successful execution of their debt management program
  • One of the ways we look at NAFTA risk between the provinces at Mawer


A transcript of this episode is available below, modified for a more enjoyable reading experience. For more posts exploring the ideas we talk about in the episode, check out our Related Reads links.


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1:20 – Why the province of Alberta issued a benchmark euro-denominated bond. The unique qualities of the bond.

  • Alberta has a lot more debt than they used to: 

“Within their debt management programs, they have to borrow about 15 billion CAD per year at the moment which is a significant amount, so when they can issue in other currencies, it alleviates the pressure on the Canadian market.”

  • Benchmark size made the issuance attractive to investors:

“Benchmark in this case is a bond market term meaning large and liquid. It was 2 to 2.5 billion dollars in Canadian equivalent which is four to five times the average deal size in Canada.

2:45 – Successes

  • An example of the successful execution of the Alberta government’s debt management program: travelling (e.g., Asia, NA, Europe, Panama) and introducing the province to the world and promoting Alberta bonds.
  • Broadened Alberta’s investor base—only about 4% of investors in the deal were from North America and a typical deal in Canada is 30 investors, this was over 100

4:20 – Attractiveness of the yield relative to other instruments (e.g., German government bond, French government bond)

5:51 – Alberta fiscal situation could drive the spread lower or higher.

“Their [Alberta government] plan is to balance the budget in 2023 or 2024 next. What that means is the amount of debt is going to increase up until that point every single year. So as an investor in Alberta what I’d like to see is some more concrete plans around balancing that budget earlier in order to improve the overall credit quality.”

6:44 – Comparing Alberta and Ontario bonds

9:44 – NAFTA effect on Ontario versus Alberta

11:10 – The currencies Alberta should stick to in the future.

11:43 – What is a good price? Foreign currency risk

13:28 – Alberta government’s next steps in bond issuances – play the plan

14:00 – Rapid Fire Round:

  • Best vegetarian restaurant?
  • Favourite vegetable?

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