A good week in the credit market
There was a pick-up in activity in the domestic credit market last week, with GPT, Coca-Cola Amatil and Telstra all adding to the recent flow of non-financial corporate bond issuance. That said, financial institutions were also in the market, with both the Sydney branch of HSBC and International Finance Corporation issuing.This activity was aided by the National Australia Bank completing a buyback of some of its government guaranteed bonds issued in late 2008 and early 2009, with the prospect of more such buybacks now Westpac has announced its plans to follow NAB's lead.Two residential mortgage-backed securities issues were also priced during the week.GPT (rated A-) sold A$200 million of five year bonds at a spread of 175 basis points over the bank bill swap rate, to yield 5.02 per cent. Coca-Cola Amatil (rated A-) raised $150 million for seven years and paid just 90 basis points over the swap rate. CCA is a rare issuer in the domestic market and can achieve tight pricing as a result. Its last issue was in March 2006 and these bonds will mature next March.Telstra (rated A) was a regular and large issuer in the domestic market until December 2006, then there was a hiatus until June 2010. Since then, Telstra has undertaken four domestic issues. The company returned to the market last week and this time sold $750 million of five-year bonds. The bonds were priced at 90 basis points over swap, to yield 4.1 per cent.HSBC (rated AA-) undertook a two-tranche issue to raise a total of $750 million for five years. The $500 million of floating rate notes and $250 million of bonds were priced at 102 points over the bank bill swap rate. Credit spreads for five-year, AA- rated bank debt have come in a long way from the 165 basis points paid by NAB in June. Lastly, International Finance Corporation (rated AAA) added $350 million to its recently opened July 2017 line. The top-up was priced at 70.7 basis points over government securities and takes outstandings to $1.15 billion.