18 Jan – 22 Jan 2016

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Corporate bond spreads were generally maintained over the week, as corporate bond yields followed the corresponding 5 year ACGB yields up by around the same amount. Even Wesfarmers, whose bonds have been placed on credit watch “negative” by S&P, after the announcement of the proposed purchase of UK retailer Homebase, escaped any noticeable spread increase, and the price of their Credit Default Swaps went up in line with the average in the index.

Issuance this week continued at a fair clip with ANZ the largest corporate issuer of the week. It sold $1.4 billion worth 3 year FRNs at 3 month BBSW + 88bps. This shows that spreads have clearly widened since the middle of last year with the nearest comparative issue being CBA’s 3 year FRN issued in October BBSW + 78bps. CBA this week sold HKD$160 million (AUD$29 million) of 10 year fixed rate bonds into the Honk Kong market. Bonds issues into the Hong Kong market are small and the bank’s last bond sale there was for HKD$100 million (AUD$18 million) back in late November.

Macquarie has been busier than usual with its 6th issue this year (see the previous week’s USD$2.5 billion 4 tranche sale). This week they returned to the bond market for a modest $100 million of 10 year fixed rate bonds at Swap + 165bps. In contrast, Westpac has been fairly quiet since mid-December but the bank returned to the domestic market during the week and sold $200 million 3 year bonds.

corporate-22jan

Aside from the banks and other regular bond issuers there were a couple of corporates not often seen in bond markets. Newcastle Permanent Building Society sold $42 million of 1 year FRNs at BBSW + 80bps, which is more expensive than the BBSW + 70bps Auswide accepted in November for its 1 year FRNs and even though Newcastle’s credit rating is a notch higher than Auswide’s rating. Impact Homes also announced a $40 million issue of 8.50% 5 year unrated bonds through FIIG.

There were only two deals done in the Kangaroo market in the week, each from a previous issuer.
Inter-American Development Bank issued $35 million October 2025s at Swap + 45bps which is quite a bit tighter than the Swap + 55.75bps in October. The Province of Manitoba was the second issuer and it was for the sale of $50 million 10 year bonds by at ACGB + 79.75bps.

itraxx-22jan

The iTraxx Australian CDS index increased over the week, finishing at 144.8, up from the previous week’s 144. The small week-to-week move masks some of the sharp rises within the week and the index rose over 150 in the middle of the week before dropping back quickly. The rise continues the trend YieldReport has mentioned in recent times which has been established since the series hit a low of 113 in early November. Most of the rise is coming from an increase in the price of credit default swap (CDS) contracts on mining companies, with the three largest CDS prices over the week (of CDS in the index) coming from Woodside, BHP and Rio.

spreadovergov
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AUS CORPORATE BONDS

ISSUERMATURITYCOUPON (%)RATINGWEEK
HIGH
WEEK
LOW
CLOSING
YIELD
Δ WEEKΔ MONTH
ANZ9-May-166.75AA-2.512.462.510.03-0.04
Westpac9-May-166.75AA-2.512.492.510.02-0.02
Transurban8-Jun-166.75A-3.293.273.27-0.04-0.10
Stockland1-Jul-167.50A-3.053.043.04-0.02-0.13
Fonterra11-Jul-166.25A+2.882.872.87-0.02-0.10
Telstra2-Aug-167.00A2.602.592.59-0.01-0.11
Melb Airport25-Aug-167.00A-3.043.033.04-0.02-0.12
Mirvac Finance16-Sep-168.00BBB+3.223.223.22-0.02-0.12
Wesfarmers4-Nov-166.00A-2.852.842.85-0.02-0.11
Westpac18-Nov-167.25AA-2.532.522.52-0.03-0.14
Suncorp (CB)6-Dec-164.75n/a2.632.622.63-0.02-0.16
CBA (CB)25-Jan-175.75n/a2.522.512.52-0.02-0.13
Aust Post6-Feb-175.50AA2.732.732.73-0.03-0.19
Westpac (CB)6-Feb-175.75n/a2.522.502.50-0.04-0.15
NAB15-Feb-176.00AA-2.562.552.56-0.02-0.15
Westpac20-Feb-176.00AA-2.562.552.56-0.03-0.16
Crown18-Jul-175.75BBB3.533.513.53-0.03-0.15
BP Cap5-Sep-174.50A3.053.043.05-0.02-0.16
BHP18-Oct-173.75A+3.503.473.50-0.01-0.02
Telstra15-Nov-174.00A2.862.852.86-0.03-0.17
HSBC16-Nov-174.25AA-2.812.802.81-0.03-0.17
Westpac24-Jan-184.25AA-2.712.702.71-0.03-0.18
CBA25-Jan-184.25AA-2.722.712.72-0.03-0.17
NAB7-Mar-187.25AA-2.712.702.70-0.04-0.20
ANZ17-Apr-184.25AA-2.802.782.80-0.01-0.17
NAB23-May-184.00AA-2.792.772.79-0.02-0.18
Syd Airport6-Jul-187.75BBB3.233.223.23-0.03-0.23
ANZ6-Nov-184.50AA-2.882.872.87-0.04-0.22
Lendlease13-Nov-185.50BBB-4.194.174.19-0.01-0.22
Telstra13-Nov-184.50A3.023.003.02-0.01-0.20
Westpac25-Feb-194.50AA-2.942.942.94-0.02-0.22
Woolworths21-Mar-196.00A-3.763.723.760.02-0.17
Wesfarmers28-Mar-196.25A-3.253.223.250.01-0.19
CBA24-Apr-194.25AA-2.992.982.99-0.02-0.20
Bris Airport9-Jul-198.00BBB3.433.423.43-0.01-0.23
Apple Inc28-Aug-192.85AA+2.782.752.780.03-0.24
Stockland6-Sep-195.50A-3.573.543.570.00-0.23
DBNGP11-Oct-196.00BBB-3.983.963.98-0.01-0.24
Westfield Retail23-Oct-195.00A3.633.613.63-0.01-0.20
CFS Retail19-Dec-195.00A3.253.233.25-0.01-0.27
CBA5-Feb-207.25AA-3.123.083.120.01-0.20
Westpac11-Feb-207.25AA-3.123.093.120.00-0.21
Wesfarmers12-Mar-204.75A-3.473.443.470.02-0.18
Qantas27-Apr-206.50BB+4.964.904.92-0.05-0.29
Lendlease13-May-206.00BBB-4.524.504.520.00-0.25
Melb Airport4-Jun-205.00A-3.423.403.420.00-0.23
Telstra15-Jul-207.75A3.353.313.350.02-0.21
Perth Airport23-Jul-206.00BBB3.883.853.880.01-0.22
Mirvac Fin18-Sep-205.75BBB+3.973.923.970.03-0.18
Bris Airport21-Oct-206.00BBB3.743.713.740.01-0.23
Aust Post13-Nov-205.00AA3.113.093.110.00-0.26
Stockland25-Nov-208.25A-3.743.723.740.00-0.24
Uni Sydney16-Apr-214.75Aa13.022.983.020.02-0.22
Apple Inc28-Aug-223.70AA+3.423.383.420.03-0.24
Melb Airport15-Sep-224.00A-3.833.793.830.02-0.24
Telstra16-Sep-224.00A3.673.643.670.01-0.26
CBA (AU)27-May-244.75AA-3.363.333.360.02-0.25
NAB25-Jun-245.00AA-3.803.773.800.03-0.24
Wells Fargo & Co.27-Aug-244.75A+3.963.943.960.01-0.22
Uni Sydney28-Aug-253.75Aa13.773.743.770.03-0.23
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