The new issue market for Canadian debt slumped in the second quarter, according to new data from the Investment Dealers Association of Canada.

The IDA says that speculation over rising interest rates during the quarter fuelled investor jitters, causing turbulence and reduced activity in most segments of Canada’s fixed income market.

The IDA reports that Government of Canada gross bond issuance totalled $13.5 billion on 29 issues in the quarter. This represents a drop of 21% in value from the prior quarter, and a 6% slide from Q2 2003.

Gross issuance of provincial bonds totalled just $7.8 billion on 60 new issues, down 38% in value from last quarter. However, this is up 29% compared to Q2 2003. And, municipal issuance was $0.7 billion in 39 new issues, down 10% compared to last quarter, and off 44% compared to Q2 2003.

Corporate debt issuance also slipped in the quarter, to $12.8 billion. This is down 5% from last quarter and down 11% over the same quarter a year ago.

The issuance activity was down, but so was the trading action. Federal bond trading held up best, totalling $1.17 trillion, unchanged on a yearly basis. However, provincial bond trading was down 10% from the last quarter at $93.5 billion, down 10% from last quarter but up 5% over the same quarter last year.

Corporate debt trading was particularly weak, totalling $25.9 billion, down 19% from last quarter and down 29% compared to Q2 2003. Real return bond trading was $4.8 billion, down 7% in value from last quarter and down 3% from Q2 last year.

Trading in money market instruments was up 0.7% on an annual basis, totaling $1.6 trillion. T-bill trading increased 17%, while trading of Bankers’ Acceptances and Commercial paper was down 19% and 7% respectively compared to the same quarter a year ago.