Good morning!
Markets raised their bets on a BoC rate hike despite inflation coming in below expectations.
AI investors are putting more chips on the table too: Tenstorrent has fresh funding, and Inovia is raising a new AI fund.
And there’s plenty more on the deal tape to start the week.
Let’s get into it.
MARKET RUNDOWN
Yesterday’s Close
U.S. tech rebounded from last week’s rout as investors returned to beaten-down chip and AI stocks, lifting the Nasdaq 1.1% and unwinding some safe-haven Treasury demand.
In Canada, BoC Governor Tiff Macklem’s weekend warning that oil-driven inflation could persist outweighed softer-than-expected CPI data, boosting BoC rate hike bets.
Higher odds of a BoC hike led to the 10Y yield jumping 12 bps, the Canadian dollar strengthening, and the TSX falling (0.7%), as financials and other rate-sensitive sectors weakened.
Higher U.S. yields also pressured gold and miners.
BRIEF OF THE DAY
Bank of Canada Rate Hike Odds Jump to 80% Despite Lower-Than-Expected Inflation
The news: By Monday afternoon, markets priced in an ~80% chance of a 25-bp rate hike by the Bank of Canada at its October 28 rate decision - up from ~35% on Friday. A hike would raise the policy rate from 2.25% to 2.50%.
The inflation report: Canada’s September annual inflation rate rose to 3.1% - above the 3.0% in August, but below the 3.2% economists had expected. Higher gasoline prices drove the increase. The BoC’s preferred core inflation measures also eased: CPI-trim to 1.8% (vs. 1.9% expected) and CPI-median to 1.9% (vs. 2.0% expected).
What changed: Over the weekend, BoC Governor Tiff Macklem warned that persistently high oil prices would push the BoC’s inflation forecast higher. With the Middle East conflict continuing, policymakers are increasingly concerned that higher energy costs will spread to the prices of other goods and services.
The warning signs: BoC surveys released on Monday reinforced that concern. About half of the surveyed firms said they plan to pass some or all of their higher energy- and tariff-related costs on to customers. Consumers’ longer-term inflation expectations also rose. These surveys point to risks ahead that September’s inflation figures may not yet capture.
The debate: BMO, RBC, and Desjardins switched to expecting a rate hike on October 28, joining Scotiabank (which already expected one). But job losses in August and September, alongside annual core inflation near 2%, still support the case for holding rates.
💼 Why this matters: The Bank of Canada is weighing whether to raise interest rates before more businesses pass higher costs on to customers. Acting early could help prevent an energy shock from becoming lasting inflation across the economy, but would put more pressure on an already fragile recovery - as higher borrowing costs would make purchases, business expansion, and acquisitions more expensive to finance.
HEADLINE RECAP
In Canada
Canada annual inflation rises to 3.1% in September; below forecasts as core measures ease (BBG)
BoC surveys show inflation expectations rising as firms plan to pass higher costs to customers (BBG)
BMO, RBC, and Desjardins now expect BoC to hike rates on Oct. 28 as market odds hit 80% (BBG)
Norwegian data center firm Bulk Infrastructure seeks Canadian majority partner for $620M+ Canada-Europe subsea fibre link bypassing the U.S. (BBG)
H&R REIT’s (TSX:HR-UN) breakup & sale faces growing shareholder opposition ahead of November vote, as Scheer Rowlett and Sandpiper join dissenters (BBG)
Bulk investors are buying Toronto-area condos at 40% discount and account for 45% of Q3 new-home sales (G&M)
Cleveland-Cliffs CEO criticizes Carney, calls for tighter curbs on Canadian steel imports to bring back Stelco workers (G&M)
Stellantis Canada union workers vote 97.3% to authorize strike action (GN)
Manitoba proposes using tax on data centres and crypto miners to lower residential utility bills (BK)
BMO Capital Markets names Rahim Bapoo to lead global critical minerals strategy as it expands in Florida (BBG)
Shopify (TSX:SHOP) CTO Mikhail Parakhin to depart and transition to advisor after 2 years in the role (BK)
Xanadu (TSX:XNDU) secures up to US$10M in additional funding from DARPA quantum program (TL)
Canadian news publishers like Globe & Mail and Canadian Press sue Anthropic over alleged use of their content to train Claude (G&M)
Québec’s strategic maple syrup reserve nearly depleted as demand surges (G&M)
DEALS WITH CANADIAN PARTIES
M&A & Investments
OTPP and packaging company Ardagh Group (NYSE:ARD) agreed to sell metal-packaging supplier Trivium Packaging at a ~US$3.4B (~$4.8B) enterprise value to a venture owned 60% by packaging manufacturer Silgan (NYSE:SLGN) and 40% by PE firm American Industrial Partners; Trivium will combine with Silgan’s metal-container and flat-cap closures businesses.
Evercore (lead), J.P. Morgan and BMO advised Trivium and its shareholders; Wells Fargo (lead) and BofA advised Silgan; Goldman Sachs advised American Industrial Partners.
Proofpoint: The Thoma Bravo-backed cybersecurity company agreed to acquire data-security provider Varonis (NASDAQ:VRNS) for US$6.3B in cash, with OTPP investing in Proofpoint in connection with the transaction.
GFL Environmental (TSX:GFL): The waste management company is reportedly weighing competing take-private proposals from KKR, Energy Capital Partners & Blackstone, and from Brookfield Asset Management & IFM Investors, in a potential ~$26B enterprise value deal.
Saturn Oil & Gas (TSX:SOIL) agreed to acquire Manitoba light-oil producer Corex Resources for ~$302M in cash and stock; Corex majority shareholders Azimuth Energy Partners funds will receive Saturn shares.
TPH & Co., the energy business of Perella Weinberg, advised Corex and provided its board with a fairness opinion.
Mullen Group (TSX:MTL): The Alberta-based trucking & logistics company agreed to acquire Willson International, a Mississauga-based Canada-U.S. customs brokerage & trade compliance firm expected to add ~$80M in annual revenue.
EY Parthenon Corporate Finance was exclusive financial advisor to Willson International.
Green Rise Foods (TSXV:GRF): The Ontario greenhouse produce grower agreed to an insider-led take-private by Pereira Verde at a ~$61M valuation including net debt, with the buyer’s principals and certain associates retaining their shares.
Blair Franklin Capital Partners advised Green Rise’s special committee and provided its fairness opinion.
Chorus Aviation (TSX:CHR) agreed to acquire SkyCare Air Ambulance, an Ontario-based medical flight operator with 22 aircraft, for $32M in cash plus ~$8M in performance-based payments.
BGO: The real estate manager (part of Sun Life’s SLC Management), alongside Banner Property Group, acquired a fully leased ~160,000-sq.-ft. cold-storage facility in Florida.
JLL represented the seller and arranged acquisition financing.
AptPay: The Toronto-based fintech platform for real-time business payments & payouts agreed to be acquired by Toronto-based KORT Payments.
FirstService (TSX:FSV): The Toronto-based property services group’s subsidiary Century Fire Protection acquired A&A Fire Protection, a South Carolina fire-sprinkler contractor, with president Jake Gilstrap retaining a minority stake.
VC & Growth Equity
Tenstorrent: The Toronto-founded AI chipmaker raised US$1.5B (~$2.1B) at a US$6.2B (~$8.7B) post-money valuation in a Series E led by Trace Capital and Innovation X, with participation from Sandisk, Tether Investments, T. Rowe Price, Fidelity, and others.
ECM
Galleon Gold (TSXV:GGO): The Toronto-based gold developer upsized its bought-deal private placement to $27M from $20M, bringing total planned equity financing to ~$32M including a concurrent $4.75M investment from Pan American Silver (TSX:PAAS); proceeds will help advance its West Cache gold project near Timmins, Ontario.
ATB Cormark was lead underwriter and sole bookrunner.
Total Energy Services (TSX:TOT): The Calgary-based energy services company renewed its share-buyback program for up to 1.815M shares (~5% outstanding or ~$68M) through October 2027; it repurchased 1.56M shares (or 85% of its prior authorization) under the expiring program.
DCM & Credit
Telesat (TSX:TSAT): The Ottawa-based satellite operator’s term loan lenders (including Silver Point Capital and Sound Point Capital Management) reportedly proposed to provide up to $3.2B in debt-and-equity rescue financing (with MHR Fund Management and PSP Investments invited to participate) to repay their December-maturing loan and avert a default.
Walmart (NYSE:WMT): The U.S. retailer began marketing its first Canadian-dollar bond offering, a four-tranche senior unsecured deal that could raise at least $3.5B across maturities spanning 4 to 30 years.
BofA, Scotiabank, and TD are joint bookrunners.
CIBC (TSX:CM) announced a $1B offering of NVCC AT1 limited recourse capital notes due 2086, paying 6.631% until 2031 and resetting every 5 years thereafter at the 5Y Government of Canada yield + 297 bps.
CIBC led the offering.
City of Brossard: The Québec municipality announced a ~$33M bond offering across six tranches due 2027-36, with coupons ranging from 3.10% to 4.70%.
National Bank was sole bookrunner.
Private Funds
Inovia Capital: The Montréal-based VC firm held a US$200M (~$282M) first close toward a US$325M target for Fund VI, its first fully AI-native fund, backed by returning LPs including La Caisse, BDC, Investissement Québec, Teralys Capital, Fonds de solidarité FTQ, CIBC, and Fondaction.
BAY STREET TRIVIA
Canada's first prime minister was the first president of which financial company?
FOR THE GROUP CHAT
