There are so many things happening in the global bond market. US higher, longer term, sovereign rates are leading the discussion. Here’s a summary of what we’ve covered in recent weeks, and what’s still being discussed:
• The US government stepped in to buy Treasuries as 30 year yields topped 5.3%.
• The US also stepped in to help protect the Japanese yen, ultimately to again support Treasury yields.
• Longer-term developed-country sovereign yields have moved higher as governments continue to rake up debt and investors demand greater compensation.
• US debt hit US$40 trillion.
• Australian debt hit AU$1 trillion.
• There is no resolution in the Middle East; fuel prices remain high and are contributing to inflation.
• Hyperscalers are issuing in size in global markets. Last week, Google parent Alphabet raised $5.5 billion after bids of $18 billion in the domestic market, breaking multiple records.
According to KangaNews, Alphabet’s issue last week was the largest-ever corporate deal, from the largest-ever book (bids taken). They published the table below showing other large issues.
Alphabet garnered plenty of attention, but the article from Jon Lechte of Income Asset Management is by far the most insightful from a bond dealer into any new deal that I’ve read. He considers relative value amongst other domestic issuance as well as detailing where they saw the best relative value. This is a must-read article.
We also publish an article from Ed Brooke of Escala Partners. I liked how he explained how they viewed the new issue from their clients’ perspective.
US debt and sovereign intervention into its own market is perhaps the most disconcerting news. Interest payments are now a significant part of US expenditure.
US government bond prices shape other markets, so we publish an insightful article from Daniel Morris of BNP Paribas, examining US debt sustainability, the corporate credit market and the potential impact on equity markets.
Is it time to consider investing in the long end of the US credit curve? John Li from J.P. Morgan Private Bank examines the market and where he sees opportunities.
Headlining the news today is the voluntary administration of Bathla Group. According to The Australian, there’s a debt of $3.6 billion to private credit investors, including: PAG, Balmain, Leda, Trilogy, Centuria Bass, Ray White Capital, Credit Connect, CVS Lane, Ingwerson Lansdown, Quay Financial, Keyview, La Trobe Financial and Austar. Which makes the article from Glenn August of T. Rowe Price on dispersion in the industry all the more relevant. While it is US-centric, it discusses general themes such as energy costs, pricing power, capital structure, and more.
Finally, JANA Investment Advisers has launched the JANA Private Credit Trust. The two institutional-grade managers that will invest on behalf of the trust are well-respected, global companies.
In other Australian corporate bond market news:
- Alphabet raised $5.5 billion across multiple tranches:
- $500m for a three-year fixed with an issue yield of 5.239%
- $750m for a three-year floating rate note with price at 65 basis points over 3-month BBSW
- $750m for a five-year fixed with an issue yield of 5.546%
- $1.5 billion for a five-year floating rate note priced at 90 basis points over 3-month BBSW
- $1 billion for a 10-year fixed with an issue yield of 6.264% or 133 basis points over semi quarterly swap
- $1 billion for a 20-year fixed with an issue yield of 6.98% or 180 basis points over semi quarterly swap
- Australian Rail Track Corp has mandated a seven- and/or 10-year senior unsecured fixed rate bond
- Banque Fédérative du Crédit Mutuel has priced a $550m senior preferred kangaroo
- $150m fixed with a 5.786% coupon
- $400m floating priced at 115 basis points over 3-month BBSW
- Bendio and Adelaide Bank raised $300m in a 10NC5 Tier 2 subordinated debt deal priced at 157 basis points over 3-month BBSW
- Coles has mandated a senior unsecured fixed rate bond with an eight and/or 10-year term
- Challenger IM raised $115m in a senior callable 7NC6 unsecured fixed-to-floating note priced at 240 basis points over semi quarterly swap, with a coupon of 7.0534%
- NextEra Energy has raised $1.3 billion in a dual tranche subordinate kangaroo:
- $800m in a 30NC5.25 floating rate tranche priced at 225 basis points over 3-month BBSW
- $500m in a fixed-to-floating tranche priced at 240 basis points over semi quarterly swap with a 7.484% coupon
- The Lottery Corp has mandated a senior unsecured fixed-rate dual-tranche bond with a six and/or 10-year term
Hope you’re having a great week!
