08 Aug – 12 Aug 2016

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The risk of corporate bond default fell again according to the index of credit default swap prices. iTraxx finished the week at 102.9, down from 107.8. The other major measure of corporate risk, corporate spreads to government bonds, also indicated more confidence in the corporate sector, although it was mostly due to contracting bank spreads. There were some considerably wider spreads on real estate groups with Mirvac and Stockland widening.

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According to CBA conditions areperfect” for corporate borrowers; there’s not much competition for funds and plenty of willing investors. Accordingly, over $11 billion of debt was sold in primary market corporate transactions this week. The bulk of it was via two large deals out of the major banks; the one from ANZ was decribed by CBA as “much needed” plus a whale-sized one from Westpac.

Westpac’s 5 tranche deal $6.5 billion offering was one of the largest bank deals seen and the largest issue seen since BHP’s five tranche multi-currency deal in October 2015. (Coincidentally, a UK advisory firm is currently recommending these BHP hybrids) Westpac’s deal included a mix of fixed and floating lines with maturities in 2019, 2021 and 2026. It is similar in structure to the five tranche USD-denominated bond sale in May this year which was worth USD$4 billion. The present deal was a bit pricier for the three year lines but less so for the 5 year and 10 year components.

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Westpac’s deal topped ANZ’s two tranche issue which, at $2.7 billion, was still at the larger end of the spectrum as far as primary market transactions go. ANZ issued $250 million August 2021s at Swap + 113bps and $2.45 billion August 2021 FRNs at 3m BBSW + 113bps which rates favourably with the same deal ($2.575 billion) at the end of March.

Other transactions of note was from Royal Bank of Canada (Sydney), which issued $600 million August 2017s at 3m BBSW + 48bps. Bendigo and Adelaide Bank issued $700 million of TORRENS Series 2015-1 RMBS via three tranches with the largest “A” tranche worth $644 million. CBA liked the result from its issue of $500 million August 2017 FRNs in late July so much it decided to do it again.

Kangaroo market issuance for the week was within the normal bounds at a bit over $650 million. Most of the eight transaction recorded were between $25 million and $50 million but there were a couple of larger ones. Asian Development Bank issued $250 million January 2021s at Swap + 36bps and KfW Bankengruppe issued $200 million January 2019s at ACGB + 48.25bps. All these and other bond issues can be found via the link below.

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AUS CORPORATE BONDS

ISSUERMATURITYCOUPON (%)RATINGWEEK
HIGH
WEEK
LOW
CLOSING
YIELD
Δ WEEKΔ MONTH
Melb Airport25-Aug-167.00A-2.232.202.20-0.04-0.34
Mirvac Finance16-Sep-168.00BBB+2.422.392.39-0.03-0.34
Wesfarmers4-Nov-166.00A-2.512.462.460.00-0.18
Westpac18-Nov-167.25AA-2.032.022.020.00-0.12
Suncorp (CB)6-Dec-164.75n/a2.102.092.09-0.05-0.22
CBA (CB)25-Jan-175.75n/a2.011.991.99-0.02-0.17
Aust Post6-Feb-175.50AA2.392.372.37-0.01-0.17
Westpac (CB)6-Feb-175.75n/a2.032.012.01-0.02-0.16
NAB15-Feb-176.00AA-2.042.032.03-0.01-0.14
Westpac20-Feb-176.00AA-2.062.052.05-0.01-0.14
Crown18-Jul-175.75BBB2.992.952.950.02-0.36
BP Cap5-Sep-174.50A2.672.642.64-0.01-0.14
BHP18-Oct-173.75A+2.762.722.720.05-0.19
Telstra15-Nov-174.00A2.472.442.440.04-0.13
HSBC16-Nov-174.25AA-2.392.362.36-0.01-0.17
Westpac24-Jan-184.25AA-2.242.202.20-0.03-0.16
CBA25-Jan-184.25AA-2.242.202.20-0.03-0.17
NAB7-Mar-187.25AA-2.242.202.20-0.03-0.14
ANZ17-Apr-184.25AA-2.292.252.25-0.03-0.15
NAB23-May-184.00AA-2.282.252.25-0.02-0.13
Syd Airport6-Jul-187.75BBB2.812.772.78-0.02-0.15
ANZ6-Nov-184.50AA-2.422.372.37-0.03-0.13
Lendlease13-Nov-185.50BBB-3.343.303.310.03-0.28
Telstra13-Nov-184.50A2.602.552.560.00-0.10
Westpac25-Feb-194.50AA-2.452.412.41-0.04-0.13
Woolworths21-Mar-196.00A-3.243.183.190.00-0.20
Wesfarmers28-Mar-196.25A-2.882.832.840.03-0.11
CBA24-Apr-194.25AA-2.492.442.44-0.04-0.15
Bris Airport9-Jul-198.00BBB3.133.073.08-0.02-0.12
Apple Inc28-Aug-192.85AA+2.342.292.30-0.03-0.14
Stockland6-Sep-195.50A-3.032.982.980.12-0.20
DBNGP11-Oct-196.00BBB-3.703.653.66-0.02-0.06
Westfield Retail23-Oct-195.00A2.822.762.77-0.04-0.16
CBA5-Feb-207.25AA-2.602.542.55-0.03-0.13
Westpac11-Feb-207.25AA-2.602.542.55-0.03-0.12
Wesfarmers12-Mar-204.75A-3.083.023.040.02-0.09
Qantas27-Apr-206.50BB+4.064.004.02-0.02-0.14
Lendlease13-May-206.00BBB-3.873.803.81-0.01-0.37
Melb Airport4-Jun-205.00A-2.912.842.86-0.02-0.10
Telstra15-Jul-207.75A2.752.692.710.03-0.10
Perth Airport23-Jul-206.00BBB3.493.433.44-0.02-0.07
Mirvac Fin18-Sep-205.75BBB+3.413.343.360.03-0.19
Bris Airport21-Oct-206.00BBB3.353.293.310.04-0.13
Aust Post13-Nov-205.00AA2.692.632.65-0.01-0.06
Stockland25-Nov-208.25A-3.103.013.01-0.06-0.25
Uni Sydney16-Apr-214.75Aa12.502.432.450.01-0.07
Apple Inc28-Aug-223.70AA+2.772.682.710.01-0.10
Melb Airport15-Sep-224.00A-3.273.183.210.00-0.03
Telstra16-Sep-224.00A2.942.842.87-0.01-0.10
CBA (AU)27-May-244.75AA-2.732.522.66-0.01-0.08
Wells Fargo & Co.27-Aug-244.75A+3.413.303.340.010.02
Uni Sydney28-Aug-253.75Aa12.932.822.860.000.00