Summary: Corporate bond spreads about 6bps wider on average; swap spreads wider; iTraxx down 4 points.
Corporate spreads finished the week about 6bps wider on average as corporate yields generally outpaced the rises of their Commonwealth counterparts. The majority of spreads’ week-on-week changes at the individual level were within a range of -5bps to 8bps. There were a few obvious exceptions but they were all bonds close to maturity.
One of the two other main measures of corporate risk, swap-to-bond spreads, widened noticeably along the curve. The other measure, credit default swap premiums, decreased. The Australian credit default swap index, the iTraxx Australia Series 37, finished 4.00 points lower at 95.00 points.
Volumes in the primary market for corporate bonds and notes returned to an above-average level on the back of another large major bank deal. $8.1 billion worth of bonds or notes were priced by local entities or their subsidiaries, whereas in the previous week issuance amounted to $3.7 billion. Asset-backed transactions accounted for $1.15 billion of $8.1 billion.
Macquarie kicked off the week’s proceedings on Tuesday with an $850 million dual-tranche issue of Tier 2 June 2032 bonds. The securities are callable in June 2027 and they were priced at Swap/BBSW + 270bps.
That night, the Bank of Queensland issued €600 million (AUD$900 million) worth of covered June 2027 FRNs at Mid-swap + 30bps.
NAB went to US markets to raise USD$2.5 billion (AUD$3.5 billion) over three tranches. The USD$750 million June 2025 tranche was priced at Treasury + 80bps, the USD$500 million floating rate tranche of June 2025s was priced at SOFR + 86bps while the USD$1.25 billion tranche of June 2027s was priced at Treasury + 110bps.
At about the same time, Westpac also went down the covered bond path. It raised USD$1.2 billion (AUD$1.67 billion) via June 2027s at SOFR + 78bps.
At the end of the week, AMP Bank tapped its December 2024 FRN line for $50 million at 3m BBSW + 106bps, 16bps more than the pricing at AMP Bank’s last tap in December 2021.
The primary market for kangaroo bonds remained quiet and there was just the one deal. Lloyds Bank issued $500 million of Tier 2 June 2027s, callable in June 2026, at Swap + 200bps.
There were two RMBS deals done during the week.
Suncorp raised $850 million for its Apollo 2022-1 Trust on Wednesday, with the $782 million Class A tranche priced at 1m BBSW + 130bps.
Pepper raised $300 million for its Social Trust No. 1 on the same day. The $80 million Class A1-s tranche priced at 1m BBSW + 100bps. The various tranches comprise prime and non-conforming loans secured by first ranking mortgages.
In ratings news, S&P downgraded BHP Group from A to A- following the merger of its petroleum assets with Woodside Energy.
S&P also placed QIC Property Fund’s A rating on CreditWatch Negative. The ratings agency said it would likely lower the rating by one or two notches if the company increases its target gearing under its proposed restructuring plan.
Moody’s affirmed AGL Energy’s Baa2 rating affirmed following the announcement AGL would not proceed with its demerger.
Interested readers can find more details as well as other bond transactions in our tables via the link below.
| ISSUER | MATURITY | COUPON (%) | RATING | WEEK HIGH | WEEK LOW | CLOSING YIELD | Δ WEEK | Δ MONTH |
|---|---|---|---|---|---|---|---|---|
| Optus | 17-Jun-22 | 4.00 | A | 1.06 | 0.96 | 1.00 | 0.07 | 0.18 |
| GE Capital | 8-Aug-22 | 5.50 | BBB+ | 1.71 | 1.68 | 1.68 | -0.02 | 0.31 |
| Optus | 23-Aug-22 | 3.25 | A | 1.72 | 1.57 | 1.68 | 0.13 | 0.40 |
| Apple Inc | 28-Aug-22 | 3.70 | AA+ | 1.53 | 1.50 | 1.53 | 0.03 | 0.35 |
| Wells Fargo | 7-Sep-22 | 5.25 | A- | 1.94 | 1.89 | 1.93 | 0.05 | 0.32 |
| Melbourne Airport | 15-Sep-22 | 4.00 | BBB+ | 1.67 | 1.56 | 1.56 | 0.02 | 0.29 |
| Telstra | 16-Sep-22 | 4.00 | A | 1.92 | 1.75 | 1.88 | 0.14 | 0.50 |
| Stockland | 23-Nov-22 | 4.50 | A- | 2.06 | 1.90 | 2.00 | 0.14 | 0.41 |
| ANZ | 16-Aug-23 | 5.00 | AA- | 3.25 | 3.02 | 3.23 | 0.23 | 0.47 |
| Transpower NZ | 28-Aug-23 | 5.75 | AA- | 3.22 | 2.96 | 3.19 | 0.27 | 0.43 |
| Mirvac Finance | 18-Sep-23 | 3.50 | BBB+ | 3.49 | 3.20 | 3.46 | 0.29 | 0.45 |
| Qantas | 10-Oct-23 | 4.40 | BB+ | 4.28 | 4.03 | 4.25 | 0.25 | 0.47 |
| Australia Post | 13-Nov-23 | 5.50 | A+ | 3.34 | 3.07 | 3.31 | 0.26 | 0.43 |
| Westpac | 21-Nov-23 | 4.40 | AA- | 3.47 | 3.22 | 3.44 | 0.25 | 0.45 |
| Fonterra | 26-Feb-24 | 5.50 | A- | 3.79 | 3.51 | 3.76 | 0.30 | 0.49 |
| NAB | 11-Mar-24 | 5.00 | AA- | 3.66 | 3.40 | 3.64 | 0.26 | 0.52 |
| Rabobank Nederland (Aust) | 11-Apr-24 | 5.50 | A+ | 3.77 | 3.50 | 3.74 | 0.25 | 0.43 |
| CBA | 27-May-24 | 4.75 | AA- | 3.78 | 3.50 | 3.75 | 0.27 | 0.44 |
| AusNet | 21-Jun-24 | 4.00 | BBB+ | 4.33 | 4.09 | 4.30 | 0.22 | 0.42 |
| Macquarie Bank | 7-Aug-24 | 1.75 | A+ | 4.14 | 3.85 | 4.11 | 0.27 | 0.46 |
| Wells Fargo | 27-Aug-24 | 4.75 | A+ | 4.28 | 3.99 | 4.25 | 0.28 | 0.40 |
| University of Sydney | 28-Aug-25 | 3.75 | Aa1 | 3.99 | 3.67 | 3.96 | 0.31 | 0.32 |
| Apple Inc | 10-Jun-26 | 3.60 | AA+ | 4.13 | 3.85 | 4.13 | 0.30 | 0.42 |
| CBA | 11-Jun-26 | 4.20 | AA- | 4.31 | 4.03 | 4.28 | 0.26 | 0.43 |
| ANZ | 22-Jul-26 | 4.00 | AA- | 4.32 | 4.05 | 4.30 | 0.27 | 0.46 |
| Qantas | 12-Oct-26 | 4.75 | BB+ | 5.43 | 5.17 | 5.40 | 0.24 | 0.35 |
| Australia Pacific Airports | 4-Nov-26 | 3.75 | BBB+ | 4.85 | 4.58 | 4.82 | 0.26 | 0.32 |
| CBA | 17-Nov-26 | 3.25 | AA- | 4.24 | 3.99 | 4.21 | 0.24 | 0.38 |
| Australia Post | 1-Dec-26 | 4.00 | A+ | 4.22 | 3.93 | 4.21 | 0.30 | 0.38 |
| WSO Finance | 31-Mar-27 | 4.50 | A- | 4.73 | 4.40 | 4.71 | 0.31 | 0.42 |
| Telstra | 19-Apr-27 | 4.00 | A | 4.53 | 4.25 | 4.51 | 0.27 | 0.41 |
| Vicinity Centre | 26-Apr-27 | 4.00 | A | 4.90 | 4.60 | 4.87 | 0.27 | 0.50 |
| Dexus Finance | 11-May-27 | 4.25 | A3 | 4.68 | 4.39 | 4.65 | 0.30 | 0.39 |
| Asciano | 12-May-27 | 5.40 | BBB- | 5.88 | 5.61 | 5.87 | 0.28 | 0.46 |
| Fonterra | 2-Nov-27 | 4.00 | A- | 4.70 | 4.38 | 4.67 | 0.31 | 0.39 |
| Macquarie | 15-Dec-27 | 4.15 | BBB+ | 5.13 | 4.82 | 5.13 | 0.31 | 0.19 |
| AusNet | 21-Aug-28 | 4.20 | A- | 5.30 | 5.01 | 5.28 | 0.31 | 0.43 |