Bank of China flexes its muscles in the bond market

Philip Bayley
Seven issuers sold almost A$3.7 billion of bonds in the wholesale corporate bond market in the last full week of March, ahead of what is likely to be a quiet week leading up to Easter.



The Sydney branch of Bank of China (rated A) priced the largest deal for the week and its largest yet in this market, at 125 basis points over the bank bill swap rate. The bank sold $1.4 billion of three-year notes, $200 million being fixed-rate and the remainder floating.



Oesterreichische Kontrollbank (rated AA+) added $75 million to the August 2025 line it opened in mid-February. The increase takes the total outstanding to $200 million and was priced at 67.5 bps over commonwealth government securities.
   


The Sydney branch of Sumitomo Mitsui Banking Corp. (rated A+) completed its largest and longest issue yet in the domestic market, selling $850 million of five-year FRNs, priced at 102 bps over bank bills.



SMBC made its market debut in March 2007, selling $200 million of three-year FRNs at a margin of just 18 bps over bank bills. That was its cheapest issue, in terms of credit spread.



SMBC did not return until 2013, when it issued in both February and October, and then issued again in August last year. The issues all had three-year terms to maturity.



Lloyds Bank (rated A) made what some described as its kangaroo debut with a two-tranche, five-year issue that raised a total of $600 million at a margin of 110 bps over the bank bill swap rate. Lloyds sold $400 million of fixed-rate notes and $200 million of floating-rate notes.



The transaction was described as a kangaroo debut because the bank has previously issued via the Australian branch of Lloyds TSB Bank. However, our records show that Lloyds Bank Plc issued subordinated debt in the market in December 2011.



The bank sold $417 million of ten-year, non-call five bonds, at spread of 875 bps over swap. Perhaps we witnessed the debut of Lloyds in its new trimmed down form, after selling TSB Bank.



KfW (rated AAA) did make a debut, however. Its inaugural green bond debut raised $600 million through the issue of 5.25-year bonds, priced at 57.5 bps over CGS. This is only the third issue of green bonds in the domestic market, with World Bank and National Australia Bank having issued green bonds last year.



Newcastle Permanent Building Society (rated BBB+) raised $50 million for five years. The FRNs were priced at 135 bps over bank bills.



Newcastle has become a regular, albeit generally small issuer, since returning to the market last year after a long absence.  

Australian borrowers of significance were absent from international bond markets last week, but we understand that Commonwealth Bank will be meeting with investors in Europe this week, and Suncorp will be doing the same in the US and Asia, starting after Easter.



Across the Tasman, Spark New Zealand (formerly Telecom Corporation of New Zealand Limited) (rated A-) sold NZ$100 million of seven-year bonds, paying 85 bps over swap. And ANZ New Zealand (rated AA-) raised US$750 million in the US s144A market. ANZ NZ's three-year bonds were priced at 85 bps over US Treasury bonds.