Summary: Corporate bond spreads 2bps tighter on average; swap spreads wider except at belly; iTraxx up 0.9 points; local issuance picks up considerably; no RMBS transactions; volumes elevated for second week in primary market for kangaroo bonds.
Corporate yields generally lagged the rises of their Commonwealth Government counterparts at the front of the curve and the median spread finished the week 2bps tighter. The majority of spreads’ week-on-week changes at the individual level were within a range of -5bps to +1bps. The most notable exceptions were Asciano May 2027s (spread: 196bps, -11bps), Qantas August 2023s (spread: 141bps, -10bps) and Qantas October 2026s (spread: 158bps, -8bps).
One of the two other measures of corporate risk, swap-to-bond spreads, widened along the curve except at the belly where they narrowed.
The other measure, credit default swap premiums, increased slightly on average. The Australian credit default swap index, the iTraxx Australia Series 36, finished 0.9 points higher at 68.00 points.
Volumes in the primary market for corporate bonds and notes picked up considerably this week as several large bank deals were priced. $7.9 billion worth of bonds or notes were priced by local entities or their subsidiaries, whereas in the previous week issuance amounted to practically nothing. There were no asset-backed transactions.
Commonwealth Bank started the week’s proceeding with a $4 billion two-tranche issue of January 2027s on Tuesday. The $3.1 billion FRN tranche was priced at Swap +70bps and the $900 million fixed-rate tranche was priced at BBSW +70bps.
The next day, Sumitomo Mitsui Bank’s Sydney branch raised $1.5 billion over two tranches of FRNs. The $600 million January 2025 tranche was priced at BBSW + 57bps and the $900 million January 2027 were priced at BBSW + 78bps.
That night, Macquarie Group raised €500 million (AUD$800 million) in the euro-zone market via an issue of January 2029s at Mid-swap + 75bps while Westpac’s New York branch raised USD$500 million (AUD$700 million) with the issue of January 2023s at SOFR +19bps.
The Bank of Nova Scotia (Australia) issued $750 million worth of January 2023 FRNs at BBSW + 25bps on Thursday. Later that night, Westpac New York added another USD$100 million to its USD$500 million from the previous night.
There were no primary market transactions for asset-backed securities during the week.
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Volumes remained elevated for a second consecutive week in the primary market for kangaroo bonds, with $2.6 billion worth of transactions for the week.
Most of the deals done during the week originated from regular issuers. Landeskreditbank, Bank Nederlandse Gemeenten, Kommunalbanken Norway and the Asian Infrastructure Investment Bank all priced $500 million tranches of bonds with maturities of either 5 years or 10 years.
Another notable deal came from the Bank of Nova Scotia. While its Australian subsidiary was issuing January 2023 FRNs in the local market on Thursday, the parent company issued $250 million January 2027s at BBSW + 87bps.
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 MONTH |
|---|---|---|---|---|---|---|---|
| NAB | 24-Mar-22 | 3.25 | AA- | 0.17 | 0.16 | 0.17 | 0.01 |
| CBA | 30-Mar-22 | 3.25 | AA- | 0.17 | 0.16 | 0.16 | -0.02 |
| Optus | 17-Jun-22 | 4.00 | A | 0.47 | 0.46 | 0.47 | 0.00 |
| Apple Inc | 28-Aug-22 | 3.70 | AA+ | 0.40 | 0.38 | 0.39 | 0.06 |
| Wells Fargo | 7-Sep-22 | 5.25 | A- | 0.54 | 0.53 | 0.54 | 0.04 |
| Melbourne Airport | 15-Sep-22 | 4.00 | BBB+ | 0.56 | 0.56 | 0.56 | 0.00 |
| Telstra | 16-Sep-22 | 4.00 | A | 0.51 | 0.49 | 0.51 | 0.05 |
| ANZ | 16-Aug-23 | 5.00 | AA- | 0.94 | 0.92 | 0.94 | 0.02 |
| Qantas | 10-Oct-23 | 4.40 | BB+ | 1.94 | 1.90 | 1.92 | 0.04 |
| Australia Post | 13-Nov-23 | 5.50 | A+ | 1.17 | 1.14 | 1.16 | 0.06 |
| Westpac | 21-Nov-23 | 4.40 | AA- | 1.11 | 1.09 | 1.11 | 0.04 |
| Fonterra | 26-Feb-24 | 5.50 | A- | 1.29 | 1.26 | 1.28 | 0.07 |
| NAB | 11-Mar-24 | 5.00 | AA- | 1.28 | 1.25 | 1.27 | 0.06 |
| Rabobank Nederland (Aust) | 11-Apr-24 | 5.50 | A+ | 1.48 | 1.46 | 1.48 | 0.08 |
| CBA | 27-May-24 | 4.75 | AA- | 1.41 | 1.38 | 1.40 | 0.09 |
| AusNet | 21-Jun-24 | 4.00 | BBB+ | 1.84 | 1.81 | 1.83 | 0.06 |
| Macquarie Bank | 7-Aug-24 | 1.75 | A+ | 1.74 | 1.71 | 1.73 | 0.07 |
| Wells Fargo | 27-Aug-24 | 4.75 | A+ | 1.80 | 1.77 | 1.79 | 0.05 |
| University of Sydney | 28-Aug-25 | 3.75 | Aa1 | 1.96 | 1.92 | 1.94 | 0.11 |
| Apple Inc | 10-Jun-26 | 3.60 | AA+ | 2.06 | 1.99 | 2.01 | 0.12 |
| CBA | 11-Jun-26 | 4.20 | AA- | 2.08 | 2.06 | 2.08 | 0.15 |
| ANZ | 22-Jul-26 | 4.00 | AA- | 2.12 | 2.08 | 2.10 | 0.15 |
| Qantas | 12-Oct-26 | 4.75 | BB+ | 3.18 | 3.07 | 3.09 | 0.12 |
| Australia Pacific Airports | 4-Nov-26 | 3.75 | BBB+ | 2.67 | 2.61 | 2.62 | 0.08 |
| Australia Post | 1-Dec-26 | 4.00 | A+ | 2.19 | 2.13 | 2.14 | 0.12 |
| WSO Finance | 31-Mar-27 | 4.50 | A- | 2.49 | 2.43 | 2.45 | 0.12 |
| Telstra | 19-Apr-27 | 4.00 | A | 2.38 | 2.32 | 2.33 | 0.12 |
| Asciano | 12-May-27 | 5.40 | BBB- | 3.59 | 3.46 | 3.47 | 0.07 |
| Fonterra | 2-Nov-27 | 4.00 | A- | 2.47 | 2.40 | 2.41 | 0.14 |
| Macquarie | 15-Dec-27 | 4.15 | BBB+ | 3.06 | 2.99 | 3.00 | 0.17 |
| AusNet | 21-Aug-28 | 4.20 | A- | 2.80 | 2.73 | 2.74 | 0.15 |