Fixed Income: Australian Debt Securities Update

Transcription

1 Fixed Income: Australian Debt Securities Update The Week Ahead Significant domestic economic data releases for the coming week include the release of private sector credit data for August and Australia s QII financial accounts. Sustained market volatility and uncertainty emanating out of Europe will continue to impact domestic investor sentiment, with primary market activity expected to be limited until some sense of order and stability is restored to the market. A$ MTN Primary Issuance Update (Format) Rating Issue Maturity Amount Coupon Spread to Benchmark AOFM (CGS Tender) AAA/Aaa AAA/Aaa Jul-22 A$700m (Total Outstanding: A$8.8bn) 5.75% % (Weighted Average Issue Yield) AOFM (CGS Tender) AAA/Aaa AAA/Aaa Jan-18 A$700m (Total Outstanding: A$6.95bn) 5.50% % (Weighted Average Issue Yield) 2011 Primary Issuance Table 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 A$21.25bn 62 A$27.3bn -A$6.05bn Domestic Banks A$19.0bn 41 A$21.95bn -A$2.95bn Foreign Bank/Branches A$16.8bn 28 A$20.25bn -A$3.45bn Non Bank Financial A$4.54bn 4 A$590m +A$3.95bn Corporate A$4.15bn 21 A$4.46bn -A$0.31bn Semi Government A$14.21n 12 A$14.2bn +A$0.01bn Total A$79.95bn 168 A$88.75bn -A$8.8bn Sources: CBA & Bloomberg Upcoming Economic Events Monday 26 September Tuesday 27 September Wednesday 28 September Thursday 29 September Friday 30 September NZ Trade balance, $mn, (129) GE IFO Business climate, Sep, Index, (108.7) GE Retail Sales, Aug. US New home sales, m%ch, (-0.7) US Dallas Fed, Sep, Index US S&P/Case-Shiller home price index, Jul. US Richmond Fed, Sep, Index, (-10) AU HIA new home sales GE CPI, Sep, US Durable goods orders, m%ch, (4.0) CA Teranet House Prices, Jul, *Note: Values in brackets represent the prior observed value. Numbers outside brackets are CBA forecasts AU ABS Job vacancies, q%ch, (-4.5) AU Population growth, QI, q/y%ch, (0.3/1.5) JP Retail sales, UK Net consumer credit, US GDP, QII, US Pending home sales, AU RP Data house prices, AU Private sector credit, AU Financial Accounts, QII NZ Building permits, NZ NBNZ Business confidence, Sep, Index JP CPI, (0.2) JP Industrial/Vehicle production, JP Construction orders/housing starts, US Personal income/spending, US Uni. Of Michigan confidence, Sep, Index

2 Yield (%) Australian Credit Market Update The secondary credit market was again affected by global market conditions this week with spreads widening generally. The A$ Swap curve flattened slightly this week with 3yr swap yields tightening slightly (approximately 3 bps) and 10yr swap yields tightening approximately 15 bps on the previous week s close. The spread between government bond yields and A$ swap yields widened in the 3 year part of the curve (approximately 3bps) and narrowed approximately 4 bps in the 10 year part of the curve. Offshore Issues by Australian Borrowers Last Week *sizeable issuance only Nothing to report Australian Rates Market Update Figure 1: 3Y and 10Y Australian Bond Curve Continued uncertainty in Europe saw Australian bonds rally, despite US equity markets making gains going into the weekend. S&P downgraded Italy's credit ratings & the RBA minutes for September were released. The front end sold off slightly on the back of the RBA minutes while the back end rallied in line with global sentiment. Gains were made in equity markets across Asia as a risk-on sentiment pervaded the market. There was a sell-off in Aussie bonds. The Federal Reserve announced that it will conduct a duration lengthening of its portfolio of US Treasuries overnight and there was a sharp rally in Aussie bonds The rally in bonds continued on Friday after another bleak night for global equity markets. The European and US markets were down 3-5% Friday 16 Monday 19 Tuesday 20 Wednesday 21 Thursday 22 Friday ACGB 10Y Bond (LHS) ACGB 3Y Bond (RHS) Sources: CBA & Bloomberg US stocks rose for the 5 th day in a row on Friday night as the market optimism following central bank action to keep US dollars flowing through the financial system persisted. On Monday however when the Australian market opened, bonds rallied initially after continued uncertainty in the Eurozone surrounding the conditions of future Greek bailouts and core countries participation in such events. Equity markets across Asia were down on Monday, and despite the initial rally, bonds finished the day fairly flat. 2

3 The S&P downgrade of Italy was one of the major movers of the Australian interest rates market on Tuesday, with the other major piece of news the release of the RBA s minutes from its meeting in September. There was a sell-off in bonds initially in response to the RBA minutes which stated that current market pricing is distorted by technical factors. The downgrade of Italy and the negative implications for the Eurozone generally caused a late rally in bonds particularly in the back end of the curve, however the selling pressure from the RBA statement in the front end remained. The IMF released a downward projection to global GDP growth on Tuesday night which was much in line with market expectations. There was a sell-off in bonds on Wednesday as a risk-on day saw gains made on equity markets across Asia. The US Federal Reserve eased monetary policy on Wednesday night, announcing that they would be extending the duration of their asset portfolio. The intended market response occurred with US Treasuries rallying strongly particularly in the back end, flattening the curve overall. Australian bonds rallied strongly on the back of this with the market still pricing in imminent interest rate cuts. Australian bonds continued their rally on Friday after another overnight session of risk-off activity. Equity markets around the world dropped with the European and US markets down 3-5%. The Australian dollar continued to crumble under the weight of global uncertainty, trading below parity with the US dollar. Ratings News New Rating / Withdrawal Upgrades or Downgrades Credit Watch / Outlook Nothing to report. Standard & Poor s lowered the long term counterparty credit ratings of a number of Italian Banks from A+ to A. The banks affected were: Mediobanca SpA, Findomestic Banca SpA, and Intesa Sanpaolo SpA and its core subsidiaries Banca IMI SpA, and Banca Infrastrutture Innovazione e Sviluppo SpA (BIIS) (BIIS), and Cassa di Risparmio in Bologna SpA. The outlook is negative. Standard & Poor s lowered Italy s unsolicited ratings to A/A-1 from A+/A1. The outlook remains negative. Moody s downgraded the long term ratings of Wells Fargo & Company to A2 from A1. Moody s also downgraded the long term ratings of Wells Fargo Bank to Aa3 from Aa2. Moody s downgraded the long term senior debt ratings of Bank of America Corporation to Baa1 from A2. BAC s short term debt ratings were also downgraded by Moody s from Prime-1 to Prime-2. Moody s downgraded KBC Bank s long term senior debt and deposit ratings from Aa3 to A1. Fitch has upgraded IDBI Bank Ltd s individual rating to C/D from D. Fitch placed UBS AG s viability rating of A- on rating watch negative. Standard & Poor s has placed UBS AG s long term A+ rating on negative watch. 3

4 Spread (bps) Spread (bps) (%) Yield (%) Spread (bps) Swap Rates Figure 2a: Australian Swap Rates Figure 2b: Australian Basis Swap Rates Yield (%) Fri, 09 Sep 11 Fri, 16 Sep 11 Fri, 23 Sep 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 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 % +89 CBA AA / Aa2 Jul % +98 CBA AA / Aa2 Feb % +185 NAB AA / Aa2 Sep % +100 WBC AA / Aa2 Aug % +97 WBC AA / Aa2 Feb % +184 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 + 86 A$250m BBSW + 15 BBSW + 15 BBSW + 15 A$500m Total Outstanding: A$ 750m A$125m Total Outstanding: A$1.0bn 6.25% ACGB ACGB % Swap Swap + 27 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 + 92 KfW Bankengruppe AAA / Aaa May-21 A$550m 6.25% ACGB ACGB Kommunalbanken Norway AAA / Aaa Oct-14 A$200m Total Outstanding: A$1.075bn 6.00% ACGB ACGB + 91 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 + 51 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 + 95 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 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 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 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