A dismal month for the corporate bond market

June has been a dismal month for the domestic corporate bond market. The issuance volume for the month is set to come in at less than half the A$7.1 billion of issuance seen in May.

The issuance total for the year to date is respectable at just under A$50 billion but let's hope that June has not set a trend that will carry on into the second half of the year. If Greece defaults in the next few days (or weeks) and leaves the Euro, we can all get back to business, including the Greeks.



FIIG Securities completed its bond issue for SCT Logistics early in the week, suggesting that there was no shortage of demand for the notes being offered. Issuer Byrns Smith Unit Trust placed A$30 million of four-year floating rate notes at a spread of 440 basis points over bank bills, and $55 million of six-year bonds at a yield of 7.65 per cent.



FIIG went on to launch another issue for Queensland based property group WA Stockwell Pty Ltd. This time $35 million of six year bonds were offered at a yield of 7.75 per cent.


Rabobank priced a two-tranche $700 million issue on Thursday and, in doing so, became the first kangaroo tier two issuer since Royal Bank of Scotland issued $883 million of old style ten-year non-call-five subordinated bonds in March 2012. RBS paid a spread of 875 bps over swap. Those were the days, and no non-viability clause either.



Lloyds Bank Plc issued $417 million of subordinated bonds at the same spread three months earlier.



Rabobank did not pay a spread of anywhere near that size. It paid just 250 bps over swap on $225 million of fixed-rate bonds, and the same margin over bank bills on $475 million of FRNs. The BBB+ rated notes will mature in July 2025 and can be called in July 2020.

Eurofima (rated AA+) was the only other issuer in the wholesale market last week, adding $30 million to the December 2025 line it opened two weeks earlier. There is now $130 million of bonds outstanding.




In New Zealand June has proved to be one of the better months for issuance in the year to date, with NZ$1.7 billion of bonds issued so far.


Last week, Transpower New Zealand (rated AA-) issued NZ$75 million of seven-year bonds, priced at a spread of 62 bps over mid-swaps.



Offshore, Westpac New Zealand raised US$100 million for three years in the Euromarket. The bonds will yield 1.82 per cent.