19 Sep – 23 Sep 2016

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At the start of the week, risk was not at the top of everybody’s wish list but by the end of the week, risk was very much back in vogue. After the world’s major central banks had convinced investors rate rises in the future would be gentle, investors went back to old habits; that is, buying corporate debt and searching for a decent yield in a low yield environment.

So, corporate bond spreads contracted again this week with the average corporate yield falling 2bps against its ACGB counterpart. The other main measure of corporate risk posed a more clouded view. iTraxx rose from 99.5 to 102.5 but these numbers are a little misleading as the new 6-monthly series of iTraxx (Series 26) took over from Series 25 on Tuesday. Even though there was no variation in the underlying companies that comprise the index, the basket of CDS have a slightly longer maturity date.

New issuance volume was relatively light with only $2.8 billion from local issuers and $125 million from offshore issuers (into the Kangaroo market). Both issuers and investors were happy to put things on hold until the BoJ and the US Fed made their pronouncements. As usual the week was dominated by bank issuance, although it was a little more varied, with a few smaller local issuers joining the fray.

The largest deal was done by ANZ with its issue of €1 billion (AUD$1.471 billion) 10 years bonds which, when swapped back into AUD, was priced at BBSW + 150bps. ANZ was also responsible for the sale of USD$30 million (AUD$39 million) September 2046 zero coupon bonds. 30 year zero coupon bonds seem to be more common in recent months and more often than not, they are priced in USD.

Another sizeable bond sale came from Bank of Tokyo-Mitsubishi (Sydney) comprising two tranches totalling $600 million. The larger tranche of September 2019 FRNs was worth $550 million and the smaller one was for $150 million September 2019. Even though spreads have come down in recent times, pricing on the sale was at 3m BBSW/Swap + 102bps which is higher than the 78bps on the $300 million 3 year FRNs issued in March 2013.

MyState Bank and Credit Union Australia (CUA) are not newcomers to the bond market and they both returned to market this week. MyState issued $10 million September 2026 (callable in 2021) FRNs at 3m BBSW + 425bps and CUA issued $80 million December 2017 FRNs at 3m BBSW + 100bps. MyState’s transaction was notable for the 75bps reduction it achieved on the pricing compared to the one in August 2015.

Other transactions of note during the week were Toyota Finance Australia’s issue of $150 million September 2017 FRNs at 3m BBSW + 40bps and the issue of $400 million ABS by Liberty Financial 2016-1 Trust.

In the Kangaroo market issuers mostly decided to stay in their bunkers with two exceptions. KommuneKredit issued $100 million November 2026s at ACGB + 77bps and Bank Nederlandse Gemeenten issued $25 million August 2026s at Swap + 75bps.

(For readers who want an explanation of the Kangaroo bond market, click here.)

All these and other bond issues can be found via the link below.

Click here for new debt issues

160926-corporates 160926-itrax

AUS CORPORATE BONDS

ISSUERMATURITYCOUPON (%)RATINGWEEK
HIGH
WEEK
LOW
CLOSING
YIELD
Δ WEEKΔ MONTH
Wesfarmers4-Nov-166A-2.322.272.27-0.05-0.14
Westpac18-Nov-167.25AA-1.961.941.94-0.01-0.06
Suncorp (CB)6-Dec-164.75n/a2.032.002.00-0.02-0.05
CBA (CB)25-Jan-175.75n/a1.951.931.93-0.02-0.07
Australia Post6-Feb-175.5AA2.382.382.380.000.02
Westpac (CB)6-Feb-175.75n/a1.961.941.94-0.02-0.06
NAB15-Feb-176AA-1.991.981.980.00-0.02
Westpac20-Feb-176AA-2.001.981.98-0.02-0.02
Crown18-Jul-175.75BBB2.882.852.85-0.01-0.02
BP Capital5-Sep-174.5A2.622.592.590.00-0.04
BHP18-Oct-173.75A+2.622.582.58-0.01-0.01
Telstra15-Nov-174A2.422.372.38-0.020.01
HSBC16-Nov-174.25AA-2.402.382.390.020.05
Westpac24-Jan-184.25AA-2.262.222.230.000.07
CBA25-Jan-184.25AA-2.252.222.220.000.06
NAB7-Mar-187.25AA-2.252.222.230.010.05
ANZ17-Apr-184.25AA-2.282.262.270.020.05
NAB23-May-184AA-2.292.262.260.000.05
Sydney Airport6-Jul-187.75BBB2.772.762.760.020.02
ANZ6-Nov-184.5AA-2.412.342.35-0.030.04
Lendlease13-Nov-185.5BBB-3.233.193.200.000.00
Telstra13-Nov-184.5A2.582.542.550.010.05
Westpac25-Feb-194.5AA-2.442.402.40-0.010.04
Woolworths21-Mar-196A-3.143.093.10-0.02-0.02
Wesfarmers28-Mar-196.25A-2.852.822.830.010.07
CBA24-Apr-194.25AA-2.502.422.42-0.050.04
Bris Airport9-Jul-198BBB3.133.053.05-0.050.03
Apple Inc28-Aug-192.85AA+2.382.312.31-0.060.03
Stockland6-Sep-195.5A-2.992.942.94-0.020.16
DBNGP11-Oct-196BBB-3.723.693.700.010.08
Westfield Retail23-Oct-195A2.852.822.820.000.08
CBA5-Feb-207.25AA-2.592.532.53-0.050.03
Westpac11-Feb-207.25AA-2.582.532.53-0.040.03
Wesfarmers12-Mar-204.75A-3.043.003.00-0.020.06
Qantas27-Apr-206.5BB+4.074.034.03-0.030.07
Lendlease13-May-206BBB-3.793.733.73-0.040.02
Melb Airport4-Jun-205A-2.912.862.86-0.040.07
Telstra15-Jul-207.75A2.752.702.70-0.030.07
Perth Airport23-Jul-206BBB3.523.483.48-0.030.07
Mirvac Finance18-Sep-205.75BBB+3.303.223.22-0.06-0.06
Bris Airport21-Oct-206BBB3.333.233.23-0.080.03
Australia Post13-Nov-205AA2.752.702.70-0.030.09
Stockland25-Nov-208.25A-3.103.053.05-0.030.07
Uni Sydney16-Apr-214.75Aa12.542.482.48-0.040.09
Apple Inc28-Aug-223.7AA+2.792.712.71-0.080.06
Melb Airport15-Sep-224A-3.263.173.17-0.080.03
Telstra16-Sep-224A2.972.872.87-0.100.03
CBA27-May-244.75AA-2.862.752.75-0.16
Wells Fargo27-Aug-244.75A+3.493.373.37-0.110.05
Univesity of Sydney28-Aug-253.75Aa13.022.912.91-0.100.08