Banks gently re-open domestic bond markets
There was more activity in domestic corporate bond markets by banks last week, but it seems there was a desire to keep some of it quiet. Westpac, Commonwealth Bank and the latter's New Zealand subsidiary, ASB Bank, all issued in their home markets.Westpac (rated AA-) undertook two private placements of A$200 million each with one year terms to maturity. The floating rates were priced at 30 and 35 basis points over bank bills.CBA (rated AA-) quietly placed $1.25 billion of four-year FRNs. The pricing on the transaction was a respectable 85 bps.This is the first sizeable issue by a major bank since National Australia Bank sold A$1.2 billion of five-year bonds at 78 bps over swaps in mid-May.ASB (rated AA-) priced a two-tranche issue to raise a total of NZ$525 million. This is a large transaction for the New Zealand market.The issue comprised NZ$250 million of July 2018 bonds priced at 110 bps over swap and $275 million of August 2018 FRNs with the same spread.Coming just a week after Westpac New Zealand sold NZ$385 million of three-year bonds, the issues are tapping into demand coming from a large volume of bonds maturing this month, and the large volume of maturities that will occur in 2014.In the retail sector, Westpac completed the book-build for its Subordinated Notes II issue.As is typical, the pricing came in at the low end of the 230 to 245 bps range. However, the issue size was only increased by A$100 million, to $850 million.The limited increase in the issue size is a little surprising, and it is not clear what may have been the cause. It could be that demand was more modest, with the book-build coming just a week after ANZ had upsized its capital note issue to $1.0 billion.It could also be that the coupon, set at 110 bps below that being paid on the ANZ capital notes, was not very attractive. The other possibility is that roll-overs by current Westpac SPS note-holders are expected to be modest, given that there is $1.04 billion of SPS notes outstanding.