Fixed Income: Australian Debt Securities Update

Transcription

1 27 June July 2011 A$ MTN Primary Issuance Update As concerns regarding a Greek default intensified early in the week, domestic primary issuance markets were temporarily sidelined. Loss of momentum was also aided by the lead up to end of financial year. Markets recovered later in the week as Greece approved the implementation of a detailed 5yr austerity plan which restored some confidence in the domestic market. More favourable market conditions made way for issuance in the latter half of the week, first with Westpac announcing a A$600m increase to their July 2015 FRN on Thursday, followed by a new 3yr from AMP Bank arranged by CBA. (Format) Rating Issue Maturity Amount Coupon Spread to Benchmark AMP Bank Senior Unsecured Westpac Senior Unsecured AOFM CGS Tender A/A2 A/A2 Jun-14 A$250m BBSW BBSW AA/Aa2 AA/Aa2 Jul-15 A$600m (Total Outstanding:1.03bn) AAA/Aaa AAA/Aaa Oct-15 A$1,250m 4.75% BBSW BBSW Weighted Average Yield % **Note: Yellow border denotes CBA acted as a lead manager to the transaction 2011 Primary Issuance Table Week ending 24 June Year to Date 2010 Year to Date Comparison No. of No. of No. of Sector Volume Volume Volume Volume Transactions Transactions Transactions SSA A$16bn 43 A$18.87bn -A$2.87bn Domestic Banks 2 A$850m 16 A$16.5bn 19 A$12.74bn +A$3.76bn Foreign Bank/Branches A$13.9bn 15 A$10.8bn +A$3.1bn Non Bank Financial 11 A$4.24bn 3 A$440m +A$3.8bn Corporate A$3.7bn 12 A$2.11bn +A$1.59bn Semi Government 8 A$10.8bn 9 A$13.05bn -A$2.25bn Total 2 A$850m 107 A$65.14bn 101 A$58.01bn +A$7.13bn Sources: CBA & Bloomberg Offshore Issues by Australian Borrowers *sizeable issuance only Market Rating () Maturity Amount Envestra Ltd US PP NAIC-2 Metcash US PP NAIC-2 **Note: Yellow border denotes CBA acted as a lead manager to the transaction 10 yr 12 yr 30 yr 7 yr 10 yr 12 yr US $240m / A$ 115m US$ 150m 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 Australian Rates Market Update Figure 1: 3Y and 10Y Australian Bond Curve The Aussie bond market rallied on the back of skeptism surrounding Greek debt viability. Bond markets sold off on Tuesday following on from a risk on attitude in the US overnight. Also, renewed confidence of a solution in Greece was inspired by support from France. Further details of French support in the Greek Debt debacle saw bonds sell off for the second day in a row. The proposed "voluntary" Greek debt rollover saw bond yields higher across the curve. Bonds sold off for a third consecutive day after the successful passage of an austerity package in Greece Bonds sold off yet again after a heavy risk on sentiment in the US overnight. Positive economic data accompanied by the successful passage of the Greek austerity implementation Bill Friday 24 June 2011 Monday 27 June 2011 Tuesday 28 June 2011 Wednesday 29 June 2011 Thursday 30 June 2011 Friday 1 July 2011 GACGB10 Index (LHS) GACGB3 Index (RHS) Sources: CBA & Bloomberg The Australian bond market experienced a turbulent week, as new information regarding the Greek debt concerns was unveiled to the market. Throughout the week, 3 and 10 year government bonds experienced trading ranges of 32 and 27 bps respectively. The week opened with a negative undertone, 3 and 10 year bonds rallied 10 and 14 points respectively as the market began pricing in the possibility of Greek default. Monday night however saw a definite change in risk attitude as the French Government announced a plan to co-opt banks to term out their exposures. This news was well received by the market with bonds selling off heavily. This sell off continued on Tuesday night as more details were released surrounding French considerations, with French banks proposing a voluntary Greek debt rollover. More good news filtered through to the market on Wednesday night with the passing of an austerity package in Greece. Once again, bonds sold off with a risk on attitude making a strong comeback in the market compared to recent weeks. The vote was passed with a margin of Thursday night was risk on in the US after some strong US economic data and the successful passage of the Greek austerity implementation Bill. Following suit from overseas markets, Aussie bonds sold off on Friday, more so in the front end, leaving the curve flatter on the week. 2

3 Australian Credit Market Update Positive news from Greece has permitted some retracement in global credit spreads. From a domestic perspective, while there has been some narrowing in credit spreads it is not to the same extent as what is being seen on the global front. This weaker domestic retracement is due to the extensive maturities through the month of June which kept the Aussie market well bid in previous weeks, shielding it from the full extent of credit spread widening experienced offshore. The A$ Swap curve experienced some flattening this week, with the short end selling off quite aggressively after good news from Europe. Ratings News New Rating / Withdrawal Upgrades or Downgrades Credit Watch / Outlook Nothing to report. Moody's Investors Service has upgraded the standalone bank financial strength rating (BFSR) of UniCredit Bank Austria (UBA) to C- from D+, which concludes the review for upgrade of the BFSR initiated on 26 May Fitch Ratings has upgraded ABN AMRO Bank N.V.'s (ABN AMRO) Individual Rating to 'C' from 'D' Standard & Poor's Ratings Services affirmed its 'A+/A-1' and 'A/A-1' long- and short-term counterparty credit ratings on Netherlands-based ING Bank N.V. and ING Groep N.V. The outlook is stable Fitch Ratings has affirmed BNP Paribas' (BNPP) Long-term Default Rating (IDR) at 'AA-' with a Stable Outlook. 3

4 Spread (bps) Spread (bps) (%) Yield (%) Spread (bps) Swap Rates Figure 2a: Australian Swap Rates Figure 2b: Australian Basis Swap Rates Fri, 17 Jun 11 Fri, 24 Jun 11 Fri, 01 Jul year 7 year 10 year 5 Year 7 Year 10 Year Rates Figure 3a: Australian Rates RBA Cash Rate 90-day Bank Bill Figure 3b: CBA Rates Forecasts End period Sep-11 Dec-11 Mar-12 Jun-12 RBA Cash Rate (%) Day Bank Bill (%) Day Bank Bill (%) Year Bond (%) Year Bond (%) Credit Markets Figure 4a: Global CDS Indices itraxx Australia (LHS) itraxx Asia (ex Japan) (LHS) U.S. CDX (RHS) Figure 4b: VIX VIX Australian Banks Figure 5a: Current Major Bank Spreads Rating Maturity Coupon Spread to Swap ANZ AA / Aa2 Feb % +70 CBA AA / Aa2 Jul % +70 CBA AA / Aa2 Feb % +141 NAB AA / Aa2 Sep % +76 WBC AA / Aa2 Aug % +72 WBC AA / Aa2 Feb % +140 Figure 5b: Australian Bank CDS Major Bank Average Senior CDS Sources: CBA, Bloomberg & Yieldbroker 4

5 Appendix: Secondary Levels of Recent Transactions Supra/Sov/Agency s Issue Rating Maturity Amount Coupon Issue Margin Secondary Trading Margin Council of Europe Development Bank AAA / Aaa Sep-14 A$125m Total Outstanding: A$1.0bn 5.75% Swap Swap + 10 European Investment Bank AAA / Aaa Jun-21 A$500m 6.25% ACGB ACGB KfW Bankengruppe AAA / Aaa Jan-16 A$500m Total Outstanding: A$1.5bn 6.00% ACGB ACGB KfW Bankengruppe AAA / Aaa May-21 A$450m 6.25% ACGB ACGB Kommunalbanken Norway AAA / Aaa Oct-14 A$200m Total Outstanding: A$1.075bn 6.00% ACGB ACGB + 75 Bank/Holding Co. s Issue Rating Maturity Amount Coupon Issue Margin Secondary Trading Margin Suncorp Metway A+ / A1 May-14 A$650m BBSW BBSW BBSW BNP Paribas Australia AA / Aa2 May-16 Morgan Stanley A / A2 May-15 Goldman Sachs Group Inc A / A1 Nov-16 A$250m 7.00% Swap Swap A$750m BBSW BBSW BBSW A$250m 7.25% Swap Swap A$250m BBSW BBSW BBSW A$750m 7.75% Swap Swap A$550m BBSW BBSW BBSW Westpac Banking Corporation AA / Aa1 May-16 A$425m 6.75% Swap Swap A$1.825bn BBSW BBSW BBSW Corporate s Issue Rating Maturity Amount Coupon Issue Margin Secondary Trading Margin Investa Commercial Property Fund Sydney Airport Finance Company Telstra Corporation Ltd A / A2 Jul-20 Goodman Australia Industrial Fund A- Jun-16 A$250m 6.75% Swap Swap BBB / Baa2 Jul-18 A$100m 7.75% Swap Swap A$150m Total Outstanding: A$500m 7.75% Swap Swap BBB May-16 A$175m 7.75% Swap Swap Sources: CBA & Yieldbroker 5

6 Contact Us Fixed Income Origination Sydney Telephone Address Peter Christie Simon Ling Daniel Cassels Rob Kenna Truong Le Danielle Lavars 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 Manager, Fixed Income Origination Manager, Commercial Paper Associate, Fixed Income Origination Analyst, 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 stevenw@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, Corporate Origination Senior Manager, Fixed Income Origination james.hammermaster@cba.com.au sean.rosas@cba.com.au Singapore Telephone Address Giles Chapman Senior Manager, Fixed Income Origination giles.chapman@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