* Bid-to-cover ratio 2.502
* Auction of 2013 bond yields average 1.576
(Updates with details, comments)
By Solarina Ho
TORONTO, July 13 Canada's sale of two-year
government bonds met with firm demand on Wednesday, though the
bid-to-cover ratio was the second lowest this year.
The C$3.5 billion ($3.65 billion) auction produced an
average yield of 1.576 percent, up from 1.572 percent at the
last two-year bond auction in June.
"It came about half a basis point through where it was
trading in the pre-market, so relatively firm, relatively
well-received. It continued to trade OK in the aftermath as
well," said Mark Chandler, head of Canadian fixed income and
currency strategy at RBC Capital Markets.
"It continues the string of auctions that we've seen of
late which are well received, well attended, relatively good
bid-to-cover ratios. Generally the bond market, certainly at
the front end, has done well in the last several weeks."
There was more than C$8.76 billion in bids from primary
dealers, resulting in a bid-to-cover ratio of 2.502, the
measure of investor demand. Chandler said Canadian auctions
were typically well-contained within the 2.5 range.
"It's not always the most important metric if you're trying
to illustrate the success of an auction," Chandler said.
The auction's success came even as bond prices slipped
across the curve with investors easing back into riskier
assets, following a choppy week in markets on concerns the
sovereign debt crisis in Europe could spread, and ongoing
softness in the U.S. economy.
The bonds, which carry a coupon of 1.500 percent, mature on
Nov. 1, 2013 and will be issued on July 15. The outstanding
debt of the issue after the auction is C$3.5 billion.
The Bank of Canada said it bought C$525 million of the
issue for itself and on behalf of its clients.
(Editing by Peter Galloway)