Fixed Income: Australian Debt Securities Update

Transcription

1 Fixed Income: Australian Debt Securities Update 7 11 The Week Ahead Investors are increasingly concerned about the debt situation in Europe, with political uncertainty in Italy and Greece, along with surging Italian bond yields, driving increased volatility across markets globally. This increased volatility is likely to continue into next week. There are no significant data releases in the next week in Australia, however the RBA minutes due to be released on Tuesday will likely give more guidance to markets on the prospects of additional interest rate cuts from the Reserve Bank. A$ MTN Primary Issuance Update (Format) Rating Issue Maturity Amount Coupon Spread to Benchmark Kommuninvest AAA/Aaa AAA/Aaa Nov-21 A$125m 5.375% ACGB Commonwealth Bank of Australia Northern Territory Treasury Corporation AOFM (CGS Tender) AOFM (CGS Tender) AA/Aa2 AA/Aa2 Aug-16 A$200m (Increase to A$2.7bn) BBSW BBSW AA1 Aa1 Nov-17 A$500m 4.75% ACGB AAA/Aaa AAA/Aaa Jul-17 AAA/Aaa AAA/Aaa Mar-19 A$700m (Total Outstanding: A$3.39bn) A$700m (Total Outstanding: A$14.65bn) Yellow border denotes Commonwealth Bank of Australia acted as a lead manager to the transaction 2011 Primary Issuance Table 4.25% 5.25% % (Weighted Average Issue Yield) % (Weighted Average Issue Yield) Week ending Year to Date 2010 Year to Date Comparison No. of No. of No. of Sector Volume Volume Volume Volume Transactions Transactions Transactions SSA 1 A$125m 58 A$21.5bn 71 A$29.7bn -A$8.2bn Domestic Banks 1 A$200m 36 A$23.6bn 68 A$26.0bn -A$2.4bn Foreign Bank/Branches A$12.9bn 48 A$22.7bn -A$9.8bn Non Bank Financial A$4.72bn 6 A$1.3bn +A$3.4bn Corporate A$4.53bn 28 A$5.4bn -A$0.9bn Semi Government 1 A$500m 17 A$15.2bn 15 A$17.4bn -A$2.2bn Total 3 A$825m 175 A$82.5bn 236 A$102.5bn -A$20.0bn Sources: CBA & Bloomberg Upcoming Economic Events Monday 14 November Tuesday 15 November Wednesday 16 November Thursday 17 November Friday 18 November NZ PSI, Oct, Index, (53.2) NZ Retail sales ex inflation, QIII, q%ch, (0.9) JP GDP, QIII, q%ch, (-0.5) JP Industrial production, Sep, JP Capacity utilisation, Sep, m%ch, (2.4) EU Industrial production Sep, m/y%ch, (1.2/5.3) AU RBA Board Minutes, November AU Motor veh. sales, Oct, m/ y%ch, (- 1.5 / 1.3) EU GDP, QIII, q/y%ch, (0.2/1.6) EU/GE ZEW survey (econ. sentiment), Nov, (-51.2/-48.3) EU Trade balance Sep, bn, (-1.0) UK CPI, Oct, m/y%ch, (0.6/5.2); core y%ch (3.3) US Business inventories, Sep, m%ch, (0.5) US Producer price index Oct, m/y%ch, (0.8 / 6.9) US Retail sales, Oct, m%ch, (1.1) US Empire manufacturing, Nov, Index, (- 8.48) AU DEWR skilled vacancies, Oct, m%ch, (-1.3) AU WP I QIII, q/ y%ch, 1.0/ 3.8 (0.9/ 3.8) AU Housing Occupancy and Costs, JP BoJ target rate, %, (0-0.10) EU CPI, Oct, m/y%ch, (0.8),core y%ch, (1.6) UK Bank of England Inflation Report UK ILO unemployment rate (3mths), Sep, %, (8.1) US CPI, Oct, m/y%ch, (0.3/3.9); core, m/y%ch, (0.1/2.0) US Industrial production, Oct, m%ch, (0.2) US Capacity utilisation, Oct, %, (77.4) AU AWOTE Aug, q/y%ch, 1.4/5.2 (1.2/ 4.4) NZ Producer prices, inputs/outputs, QIII, q%ch, (0.9 / 1.4) JP Machine tool orders, Oct, EU Construction output, Sep, m/y%ch, (0.2 / 2.5) UK Retail sales, Oct, m/y%ch, (0.6/0.6) US Housing starts, Oct, '000, (658) US Building permits, Oct, '000, (594) US Philadelphia Fed, Nov, Index, (8.7) NZ Credit card spending, Oct, m/y%ch, (0.9/4.1) GE Producer prices, Oct, m/y%ch, (0.3 / 5.5) US Leading indicators, Oct, m%ch, (0.2) CA Leading indicators, Oct, m%ch, (-0.1) CA CPI, Oct, m/y%ch, (0.2/3.2) *Note: Values in brackets represent the prior observed value. Numbers outside brackets are CBA forecasts General Advice Warning: This advice has been prepared without considering your objectives, financial situation or needs. Before acting you should consider its appropriateness to your circumstances. Commonwealth Bank of Australia as a provider of investment, borrowing and other financial services undertakes financial transactions with many corporate entities in Australia. This may include any corporate issuer referred to in this report.

2 Yield (%) Australian Credit Market Update Political concerns in Italy and Greece, as well as rising yields on Italian government debt, have left investors concerned over the future of the EU with the belief that Italy may be too big to save. Generally over the course of the week credit spreads remained relatively stable. Outright 3-year and 10-year A$ swaps narrowed over the week, whilst the 3-10 spread increased slightly. Offshore Issues by Australian Borrowers Last Week *sizeable issuance only (Format) Newcrest Finance Rating Issue BBB+/Baa2 BBB+/Baa2 Maturity Market Amount Coupon Spread to Benchmark Nov-21 US$750m 4.45% T a Nov-41 US$250m 5.75% T Telstra Corp A/A2 A/A2 May-22 EMTN EUR750m 3.75% MS Goodman Australia Industrial Nov-21 US$158m 5.26% BBB BBB USPP Fund Nov-23 US$142m 5.41% Yellow border denotes Commonwealth Bank of Australia acted as a co-manager to the transaction Australian Rates Market Update Figure 1: 3Y and 10Y Australian Bond Curve N/A Australian bond yields were little changed, with no significant reaction to the ANZ job-ads data, which reported a -0.7% decline. A quiet rally in the bond market following a significant rise in Italian yields, with no real reaction from the bond market to Australian trade balance and business confidence data. Australian bonds closed largely unchanged following developments in Europe, with Italian Prime Minister Silvio Berlusconi resigning. Italian yields rose towards 7.50% across the curve overnight, and bond yields rallied overall, despite a shortlived selloff following Australian employment data. Bond yields sold off about 5bps today, mostly in the overnight session, following a succesful Italian Government Bill auction Friday 4 Monday 7 Tuesday 8 Wednesday 9 Thursday 10 Friday ACGB 10Y Bond (LHS) ACGB 3Y Bond (RHS) Sources: CBA & Bloomberg 2

3 Australian bonds rallied a couple of basis points on a generally quiet Monday, as Treasurer Wayne Swan recommitted the Government to running a surplus in despite an increasingly adverse environment. Most financial markets were little changed in the preceding overnight session, despite Italian two-year yields rising 50 basis points and ten-year yields rising 30 basis points. Australian bond markets quietly rallied for most of Tuesday and did not react to any of the data releases. Developments from Europe continued to impact on market sentiment on Wednesday, as Italian Prime Minister Silvio Berlusconi effectively lost the support of Parliament and resigned following the close of European bond markets. In reaction, Australian yields opened down around 7-8 basis points, however recovered later in the day. A significant sell-off in risk assets Thursday following a blow-out in Italian yields, which crossed the 7% mark across the board, rising to about 7.50% across the curve. European debt crisis fears drove equity markets substantially lower globally. Australian bonds rallied hard despite a short-lived selloff following the release of unemployment data, with the Australian unemployment rate printing at 5.2%. Italian bond yields rallied back strongly in the Thursday overnight session with a successful Italian Government Bill auction, coming in basis points lower across the curve, although the ECB is widely assumed to have been involved. The Australian bond market sold off Friday around 5 basis points today, predominantly in overnight moves. Ratings News New Rating / Withdrawal Upgrades or Downgrades Credit Watch / Outlook Nothing to Report S&P has reviewed its Banking Industry Country Risk Assessments (BICRAs) for 86 countries using its update BICRA criteria. Australia has been moved to Group 2 from Group 1, as was expected. Moody s has downgraded the credit ratings of Dexia s three main operating entities to A3 from A1, whilst lowering their Bank Financial Strength Ratings to D. The outlook on the BFSR is negative. Moody s has placed Macquarie Group Limited s A2 senior unsecured debt rating and Prime-1 short-term rating on review for possible downgrade. Nomura Holdings Baa2 rating has been placed under review by Moody s for possible downgrade. Moody s has placed Lloyds TSB Bank plc under review for possible downgrade. Five South African banks have been placed on review for downgrade by Moody s. The banks are Standard Bank of South Africa, Absa Bank Limited, FirstRand Bank Limited, Nedbank Limited and Investec Bank Ltd. 3

4 Spread (bps) Spread (bps) (%) Yield (%) Spread (bps) Swap Rates Figure 2a: Australian Swap Rates Figure 2b: Australian Basis Swap Rates Yield (%) Fri, 28 Oct 11 Fri, 04 Nov 11 Fri, 11 Nov year 7 year 10 year 5 Year 7 Year 10 Year Rates Figure 3a: Australian Rates RBA Cash Rate 90-day Bank Bill 10Y ACGB 180-day Bank Bill 3Y ACGB Figure 3b: CBA Rates Forecasts End period Dec-11 Mar-12 Jun-12 Sep-12 RBA Cash Rate (%) Day Bank Bill (%) Day Bank Bill (%) Year Bond (%) Year Bond (%) Credit Markets Figure 4a: Global CDS Indices Figure 4b: VIX itraxx Australia (LHS) itraxx Asia (ex Japan) (LHS) U.S. CDX (RHS) 20 VIX Australian Banks Figure 5a: Current Major Bank Spreads Rating Maturity Coupon Spread to Swap ANZ AA / Aa2 Feb % +99 CBA AA / Aa2 Jul % +101 CBA AA / Aa2 Feb % +195 NAB AA / Aa2 Sep % +104 WBC AA / Aa2 Aug % +104 WBC AA / Aa2 Feb % +196 Figure 5b: Australian Bank CDS Major Bank Average Senior CDS 4

5 Appendix: Secondary Levels of Recent Transactions Supra/Sov/Agency s Issue Rating Maturity Amount Coupon Issue Margin Secondary Trading Margin International Finance Corporation AAA/Aaa Aug-16 Rentenbank AAA/Aaa Apr-18 Council of Europe Development Bank AAA / Aaa Sep-14 A$1.25bn 5.00% ACGB + 74 ACGB + 83 A$250m BBSW + 15 BBSW + 15 BBSW + 19 A$500m Total Outstanding: A$ 750m A$125m Total Outstanding: A$1.0bn 6.25% ACGB ACGB % Swap Swap + 40 European Investment Bank AAA / Aaa Jun-21 A$500m 6.25% ACGB ACGB KfW Bankengruppe AAA / Aaa Jan-16 A$500m Total Outstanding: A$2bn 6.00% ACGB ACGB + 96 KfW Bankengruppe AAA / Aaa May-21 A$550m 6.00% ACGB ACGB Kommunalbanken Norway AAA / Aaa Oct-14 A$200m Total Outstanding: A$1.075bn 6.00% ACGB ACGB + 90 Bank/Holding Co. s Issue Rating Maturity Amount Coupon Issue Margin Secondary Trading Margin JPMorgan Chase & Co. A+/Aa3 Mar-16 Commonwealth Bank of Australia Canadian Imperial Bank of Commerce A$275m BBSW BBSW BBSW A$75m 7.00% Swap Swap AA/Aa2 Aug-16 A$2.5bn BBSW BBSW BBSW AAA/Aaa Jan-15 A$600m 5.25% Swap + 50 Swap + 68 Rabobank AAA/Aaa Jul-16 A$800m BBSW BBSW BBSW Oversea-Chinese Banking Corporation, Sydney Branch Industrial & Commercial Bank of China, Sydney Branch A+/Aa1 Jul-14 A$500m BBSW + 83 BBSW + 83 BBSW + 96 A/A1 Jul-14 A$400m BBSW BBSW BBSW Westpac AA/Aa2 Jul-15 A$600m BBSW BBSW BBSW National Australia Bank AA/Aa2 Jun-16 A$2.8bn BBSW BBSW BBSW AMP Bank A/A2 Jun-14 A$250m BBSW BBSW BBSW Morgan Stanley A / A2 May-15 Goldman Sachs Group Inc A / A1 Nov-16 A$250m 7.25% Swap Swap A$250m BBSW BBSW BBSW A$750m 7.75% Swap Swap A$550m BBSW BBSW BBSW Corporate s Issue Rating Maturity Amount Coupon Issue Margin Volkswagen Financial Services Australia New Zealand Milk Pty Ltd (Fonterra) Sydney Airport Finance Company Telstra Corporation Ltd A / A2 Jul-20 Sources: CBA & Yieldbroker Secondary Trading Margin A-/A3 Jul-15 A$150m 6.25% Swap Swap A+/AA- Jul-16 A$300m 6.25% Swap Swap BBB / Baa2 Jul-18 A$100m 7.75% Swap Swap A$150m Total Outstanding: A$500m 7.75% Swap Swap

6 Contact Us Fixed Income Origination Sydney Telephone Address Peter Christie Simon Ling Daniel Cassels Rob Kenna Truong Le Danielle Lavars Tabitha Potts Simon Rutz Andrew Murray Casey de Souza Alex Lucy Katherine Chan Head of Fixed Income Origination & Distribution Head of Retail and Wholesale Origination Executive Manager, FIG Origination Executive Manager, Corporate Origination Executive Manager, Retail Fixed Income Origination Senior Manager, Fixed Income Origination Senior Manager, Fixed Income Origination Manager, Fixed Income Origination Manager, Commercial Paper Associate, Fixed Income Origination Associate, Fixed Income Origination Analyst, Retail Fixed Income Origination New York / Sydney Telephone Address Bill Stevenson Mark Wang Hilary Ward Amy Lung Executive Manager, USPP Fixed Income Origination Executive Manager, USPP Fixed Income Origination Executive Manager, USPP Fixed Income Origination Senior Manager, USPP Fixed Income Origination William.stevenson@cba.com.au mark.wang@cba.com.au wardhi@cba.com.au amy.lung@cba.com.au London Telephone Address James Hammermaster Sean Rosas Senior Manager, FIG Origination Senior Manager, Fixed Income Origination james.hammermaster@cba.com.au sean.rosas@cba.com.au Auckland Telephone Address Brian McTaggart Richard Howse Charlotte Hover Head of Capital Markets NZ Director Executive Assistant brian.mctaggart@asb.co.nz richard.howse@asb.co.nz charlotte.hover@asb.co.nz Fixed Income Syndication Sydney Telephone Address Paul O Brien Patrick Moore Head of Fixed Income Syndication Senior Manager, Fixed Income Syndication paul.edward.obrien@cba.com.au patrick.moore@cba.com.au Sales Institutional Telephone Equities Telephone Syd Melb Lon HK Sing NY FX Credit Japan Desk FX Debt & Derivatives Corporate Syd Asia Lon/Eu NY Corporate NSW VIC SA WA QLD NZ Metals Desk Agri Desk (Corp) Agri Desk Telephone