Last week produced plenty of activity in the debt capital market, with A$6.7 billion of bonds issued, and nearing the record set in December 2008 (when A$7.1 billion in bonds were sold).
Bank of Queensland issued A$450 million of fixed rate and A$550 million of floating rate, government-guaranteed five-year bonds, priced at 35 basis points over swap/bank bills. This is a narrow spread, though BOQ must pay another 150 bps to Treasury as the fee for relying on the Australian government's credit.
This is also the best margin for medium-term debt the bank has achieved since the onset of the GFC. Only last month, BOQ paid 30 bps over swap bank bills for a top-up to its shorter, October 2012 line.
Commonwealth Bank became the second of the four major banks to publicly sell debt in the domestic market this year. CBA issued A$600 million of fixed and A$900 million of floating rate bonds for three years, priced at 80 bps over swap/bank bills.
Against the ANZ's five-year bond issue last month at 95 bps over, the pricing of the CBA bonds looks reasonable.
There are few three-year benchmarks from the four majors in the domestic market that can be used for pricing comparisons. The last three-year bond issued was a A$50 million private placement by Westpac in September, that was priced at a very low 62 bps over. Westpac also raised A$300 million in July, for three years, at 120 bps over.
The chart below illustrates how credit spreads have moved for the four major banks in the domestic market, since the beginning of 2008.
20100308 majors credit margins
Heritage Building Society (BBB) was the only other domestic issuer and it took the opportunity to issue some more government-guaranteed paper. HBS raised A$200 million, issuing five-year floating rates priced at 40 bps over bank bills.