Canadian firms rely heavily on bonds to get through crisis

Canada's corporate bond issuance between January and May soared 22.5 percent to $57.9 billion as companies rushed to the bond market to safeguard their finances during the pandemic.

The bond issuance was at its heaviest pace in at least a decade.
Among those raising debt were banks, miners, energy firms, retailers, and real estate firms.

According to Brad Meiers, head of debt capital markets and syndication at HSBC Securities, some of the borrowing was pre-funding, while others were used to pay down bank credit lines.

Bonds tend to come due over a more extended period than bank loans, making issuers more financially resilient.

To assist borrowing firms, Canada's central bank cut rates to almost zero in March and made large-scale purchases of corporate bonds to ensure borrowing through the bond market.

The availability of low-interest borrowings pushed the debt-to-equity ratio of private non-financial corporations to 212 percent in the first quarter.

With an expected sharp drop in second-quarter GDP, companies might need more cash to get through but not at the pace seen in the last couple of months, said Canadian rates & macro strategist Benjamin Reitzes of BMO Capital Markets.