Last week, ANZ surprised the market, marketing the first of its kind – a 20-year Tier 2 subordinated debt bullet. That is, a one-off maturity date after 20 years. It was part of a dual tranche offering along with a 15-year, non-call 10(15NC10) tranche. The response was overwhelming.
Bids exceeded $5.5 billion with ANZ issuing $1.5 billion – $750m for each tranche. Investors preferred the 20-year bullet, which garnered $3.12 billion in bids. According to KangaNews, ANZ revealed that more than 100 investors competed for the bullet alone.
Margins tightened from 180bps over semi-quarterly swap for the 15NC10 and 200bps for the bullet to 168bps and 180bps respectively. The bullet was especially attractive with the yield equivalent to 6.17%.
The deal extends the major bank subordinated debt yield curve and paves the way for further long-dated bullet issuance.
There was one other interesting new bond last week. The Republic of Indonesia (rated BBB by S&P Global) issued $800m in a senior unsecured dual tranche transaction:
- A five-year tranche with a 4.4% coupon or 90bps over semi quarterly swap
- A 10-tranche with a 5.3% coupon, 135 bps over swap.
Yesterday, the RBA Monetary Policy Board cut the cash rate by 25bps to 3.60% in a unanimous decision.
With the ASX200 peaking, investors are looking at de-risking and investing in fixed income. So, we’ve seen a constant stream of new products. This week, there are three new developments:
- CBA has launched Private Wealth Advantage where investors can choose their own investments, including over-the-counter bonds.
- Perpetual Asset Management has launched a new diversified Active ETF (ASX:DIFF)
- Challenger Investment Management has announced plans to launch a new ASX-listed, fixed-term investment paying monthly interest.
Global credit, that is corporate bonds, carries less risk than US credit, according to Owen Murfin from MFS Investment Management. This is an in-depth analysis and highly recommended reading.
Credit default swaps are used in a range of ways to manage risk and take positions in the market. Chris Iggo from AXA IM, summarises them in his article this week.
Janus Henderson recently held its annual insurance symposium in Sydney and found some interesting stats on portfolio intentions in the coming year. As insurers, who have large sums to invest, and are active fixed income investors, I thought you might be interested in the report.
Have a great week!
