November 2015

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Corporate bond spreads tightened over the month as the rise in Commonwealth Government bonds yields was not fully reflected in the semis or corporate markets.

November followed in October’s path with a plethora of corporate issues and the size and number may be indicative of issuers attitudes to the future.
The major deals done in the months were kicked off by Westpac’s issue of 5 year fixed rate covered bonds worth USD$1 billion at Swap + 80bps. As one of Australia’s four major banks, Westpac is a regular issuer into both domestic and offshore markets. It last issued covered bonds into the US market in early July but the most recent issue of covered bonds was into the Eurozone in mid-July.

ANZ then issued $600 million tier 2 notes at a margin seen as being on the generous side and perhaps indicative of a change in attitudes towards bank debt. This transaction also saw yields on similar tier 2 debt move higher. ANZ had a similar tier 2 deal in July 2014 when it issued $750 million worth of 10 year (non-callable for 5 years) bonds.

The biggest deal of the month was from ANZ when it sold a USD$3.25 billion four tranche fixed and floating deal into the US market. It comprised two 3 year tranches of USD$750 million, one fixed, the other floating, another $750 million tranche of 10 year fixed rate bonds and a USD$1 billion 5 year fixed tranche.

Westpac returned to the US market with a three tranche fixed/floating issue in a deal reminiscent of ANZ’s deal in the previous week. It comprised two 3 year tranches – USD$750 million of floating rate and USD$1 billion of fixed rate and a USD$1 billion tranche of 5 year fixed rate bonds.

National Australia Bank skipped the US market and went into the European market instead to issue €1 billion worth of bonds in two tranches; €750m 7 year covered bonds and €250 million worth of 4 year floating rate bonds.

Firstmac sold $690 million worth of RMBS via multiple tranches with the largest tranche worth $400 million and Bankwest refinanced its Swan 2010-2 Class A3 notes by issuing the $190 million of Class A3-R notes.

Normally known for their bond sales into the Kangaroo market, Sumitomo’s Sydney branch sold $600 million of 5 year floating rate notes, but this time it cost them more than the deal done in March.

On the ratings front, the big news of the week in the ratings area was Qantas’ return to investment grade status, moving from BB+ to BBB-. Lesser known corporations Greater Building Society also had their credit ratings increased a notch but they were already investment grade anyway.

The iTraxx series 24 index started November at 117 and continued its down trend until the middle of the month when the cost of insuring corporate debt began to rise, albeit from a low base. Concerns over the corporate debt quality seem to have faded, at least until the next disaster. The cost of insuring corporate debt as measured by iTraxx finished the month at just over the average reading for the Series 24 index at 125.4.

corporate-bonds-nov
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AUSTRALIAN CORPORATE BONDS

ISSUERMATURITYCOUPON
(%)
RATINGISSUE
SIZE ($m)
MONTH
HIGH
MONTH
LOW
CLOSING
YIELD
Δ MONTHΔ 2 MONTH
ANZ9-May-166.75AA-7752.392.272.31-0.040.04
WESTPAC9-May-166.75AA-6252.382.262.30-0.030.03
TRANSURBAN8-Jun-166.75A-2003.203.103.13-0.04-0.02
STOCKLAND1-Jul-167.5A-02.982.842.88-0.080.01
FONTERRA11-Jul-166.25A+02.742.632.67-0.050.02
TELSTRA2-Aug-167A02.502.362.40-0.090.02
MLBAIRPORT25-Aug-167A-02.942.792.83-0.09-0.04
MIRVAC FIN16-Sep-168BBB+03.102.983.02-0.060.05
WESFARMERS4-Nov-166A-5002.702.592.63-0.040.08
WESTPAC18-Nov-167.25AA-16952.392.272.31-0.060.01
CB SUNCORP6-Dec-164.75N/A11002.542.402.45-0.030.04
CB CBA25-Jan-175.75N/A20002.392.272.31-0.050.03
AUSTPOST6-Feb-175.5AA02.672.562.60-0.05-0.02
CB WESTPAC6-Feb-175.75N/A17002.372.272.32-0.030.04
NAB15-Feb-176AA-13002.452.342.38-0.050.03
WESTPAC20-Feb-176AA-7252.452.332.37-0.060.02
CROWN18-Jul-175.75BBB3003.383.263.29-0.03-0.02
BPCAP5-Sep-174.5A02.982.862.89-0.060.02
BHP18-Oct-173.75A+10003.163.043.070.040.19
TELSTRA15-Nov-174A7502.782.662.70-0.040.08
HSBC16-Nov-174.25AA-2502.742.612.65-0.050.01
WESTPAC24-Jan-184.25AA-2502.632.512.55-0.050.01
CBA25-Jan-184.25AA-7502.642.512.56-0.050.01
NAB7-Mar-187.25AA-7002.642.512.54-0.06-0.02
ANZ17-Apr-184.25AA-2502.702.602.63-0.050.02
NAB23-May-184AA-3252.722.602.63-0.050.01
SYDAIRPORT6-Jul-187.75BBB03.263.123.14-0.06-0.06
ANZ6-Nov-184.5AA-3002.842.722.75-0.030.06
LENDLEASE13-Nov-185.5BBB-2504.103.984.020.110.22
TELSTRA13-Nov-184.5A5002.992.862.88-0.050.10
WESTPAC25-Feb-194.5AA-11002.892.792.81-0.020.06
WOOLWORTHS21-Mar-196A-5003.613.473.520.000.13
WESFARMERS28-Mar-196.25A-5003.183.073.100.010.11
CBA24-Apr-194.25AA-5002.952.812.85-0.040.05
BRISAIR9-Jul-198BBB2003.433.313.33-0.01-0.01
APPLE28-Aug-192.85AA+4002.922.692.70-0.142.70
STOCKLAND6-Sep-195.5A-1503.553.413.44-0.02-0.01
DBNGP11-Oct-196BBB-04.023.873.89-0.06-0.04
WESTF RET23-Oct-195A03.603.443.46-0.020.02
CFS RETAIL19-Dec-195A03.343.183.21-0.05-0.06
CBA5-Feb-207.25AA-2503.133.013.03-0.040.05
WESTPAC11-Feb-207.25AA-3903.133.003.03-0.040.03
WESFARMERS12-Mar-204.75A-3503.413.283.30-0.010.07
QANTAS27-Apr-206.5BB+2505.084.964.990.000.21
LENDLEASE13-May-206BBB-2254.504.334.430.200.27
MLBAIRPORT4-Jun-205A-2253.493.333.35-0.05-0.03
TELSTRA15-Jul-207.75A5003.353.193.21-0.060.10
PERAIR23-Jul-206BBB03.793.673.720.060.08
MIRVAC FIN18-Sep-205.75BBB+2003.783.653.680.020.02
BRISAIR21-Oct-206BBB3503.763.643.660.020.02
AUSTPOST13-Nov-205AA03.233.073.10-0.03-0.03
STOCKLAND25-Nov-208.25A-1603.753.603.650.00-0.02
UNISYD16-Apr-214.75N/A2003.092.942.96-0.05-0.09
APPLE28-Aug-223.7AA+11503.723.403.42-0.303.42
TLSAU19-Sep-224A5003.843.713.73-0.08-0.14
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