Bond issuers don’t like uncertain markets. It’s harder to price new issues, especially if there’s volatility in benchmark government bond prices. So, Trump’s relaxation on tariffs and lower and more stable benchmarks has seen plenty of new issues over the last couple of weeks.
Investors were waiting on the sidelines, bidding far more than companies wanted to raise, allowing issuers to tighter spreads. Here are some of the more interesting issues:
- MyState raised $100m in a Tier 2 subordinated, floating rate, 10-year non-call 5 bonds (10NC5), meaning the company can call or repay the bond after five years, which is what investors would expect, but final maturity is in 10 years’ time. The floating rate issue paid 3-month BBSW + 275 basis points equating to around 6.3% at first issue
- Western Australia Treasury Corporation raised $2 billion in a 10-year, fixed-rate green bond with a 4.75% coupon.
- Yesterday, QBE was taking indications of interest (IOI) for a Tier 2 Subordinated 11NC6 deal. Coupons can be floating or fixed to floating and price guidance was 220bps over swap.
- Suncorp also came to the market yesterday with an IOI for a 5-year senior, floating and /or fixed deal. Price guidance is 102bps over swap
- New Zealand dairy company, Fonterra raised $300m in a senior unsecured, fixed rate bond paying 145bps over semi quarterly swap
- Aurizon raised $500m in 30NC5.25 subordinated notes, for more information see the IAM report we publish as part of the newsletter this week. It has an excellent graph comparing spreads (margins above benchmarks) for corporate bonds across a range of credit ratings
- Orders for the new NAB senior unsecured floating rate bond exceeded $5 billion, which was scaled back to $2.5 billion. Initial price guidance was 3-month BBSW +85 bps but priced lower at 78bps
- Worley Group raised $400 million in a senior unsecured deal, over seven years at a margin of 205 bps over semi quarterly swap, equating to 5.868% at first issue. The bond was senior unsecured and rated BBB.
- Sydney Airport raised $600 million in a senior secured, seven-year transaction, the coupon was 5.5% p.a.
Asset backed securities issuers FirstMac, Thinktank and Plenti were also in the market.
Private markets continue to garner attention and this week we publish a summary of findings in the Australian Private Capital Yearbook, a joint initiative between the Australian Investment Council and Preqin.
Zagga, who specializes in real estate private credit, has a new fund with a twist.
What happens in US markets reverberates around the world. This week we publish two excellent articles. Arif Husain from T. Rowe Price discusses tariffs and the impact on US Treasuries. Husain provides great strategic insight and lets us into how he thinks about markets, he also reveals a cheap trade.
Seema Shah from Principal Asset Management assesses the standoff between Trump and US Fed Chair, Jerome Powell. She believes longer end interest rates are susceptible to upward pressure, potentially hurting long duration assets.
Benoit Anne from MFS Investment Management presents his weekly market viewpoints from a fixed income perspective, including market reactions and fallout from Trump’s tariff reductions with China.
Make sure to have a look at our updated bond portfolio examples. With the help of IAM, we show two examples, both investment grade and both yielding more than 5% p.a.
Have a great week!
