Debt capital market perks up

After weeks of inactivity domestic issuers returned to corporate bond markets with a vengeance last week. Bonds totalling A$5.5 billion were issued in the domestic market and the equivalent of A$6.5 billion of bonds were issued in international markets.



The July issuance volume in the domestic market now stands at A$5.6 billion, well ahead of the June total of just $3 billion.  Month to date international issuance is running at $10.6 billion, again well ahead of the June total of $7.9 billion.   



In the domestic market the week was bookended by benchmark five-year issues from Commonwealth Bank (rated AA-) and Westpac (rated AA-). CBA started the week with a $1.5 billion five-year floating rate note issue, priced at 90 basis points over bank bills.

Westpac finished the week with a $2.9 billion two-tranche issue ($200 million fixed, $2.7 billion floating), which attracted the same pricing.



In between these two benchmark issues Toronto Dominion Bank (rated AA-) undertook its first senior unsecured issue in the domestic market. The bank sold a modest $350 million of 18-month FRNs, priced at a spread of 48 bps over bank bills.



Toronto Dominion has $1 billion of November 2019 covered bonds outstanding, which were issued at the end of October last year.



DBNGP Finance (rated BBB-) returned to the market with its longest dated issue yet. The company sold $55 million of eight-year FRNs priced at a spread of 200 bps over bank bills.

KFW (rated AAA) added $650 million to its April 2020 line to take the total outstanding to $1.7 billion. The bonds were priced at 64.75 bps over commonwealth government securities to yield 2.8625 per cent.



Nederlandse Waterschapsbank (rated AA+) increased its July 2025 line by $25 million, taking the total outstanding to $255 million. The increase was priced at 74.5 bps over CGS.



And Bank Nederlandse Gemeenten (rated AA+) added another $60 million to its July 2025 line that it had tapped just the Thursday before. The increase was priced 0.25 bps tighter than previously at 78.75 bps over CGS, and takes the total size of the issue to $780 million.



Offshore, National Australia Bank (rated AA-) was active in the US s144A market selling US$750 million of three-year FRNs, US$750 million of three-year bonds and US$1 billion of five-year bonds. The three-year FRNs were priced at 64 bps over Libor and the bonds at 85 bps over US Treasury bonds. The five-year bonds were priced at 100 bps over.



NAB reported that pricing came in 10 bps to 15 bps on each tranche from launch levels.



This is just as well for NAB. With the three-year tranches swapping back into Australian dollars at 89 bps over bank bills and 118 bps over for the five-year bonds, this was expensive funding, considering the spread paid by CBA and Westpac for five-year funding in the domestic market.

But clearly NAB felt it could not tap the domestic market in the same week as the other two.    



Earlier in the week, NAB sold CHF200 million of seven-year bonds in the Euromarket. The bonds were priced at a spread of 25 bps over mid-swaps.



ANZ (rated AA-) also avoided the domestic market and chose to raise funds in the Samurai and Dim Sum markets instead. 



ANZ sold Â¥80 billion of five-year bonds that will pay just two bps over swap (or 0.343 per cent). The proceeds equate to about A$870 million.



The bank also sold CNY405 million (A$88 million) of five-year bonds that will yield four per cent.



Macquarie Bank (rated A) was active in the Euromarket, placing €40 million of three year FRNs at a spread of 30 bps over Euribor, and adding a further €60 billion to the line two days later.



And Westpac followed up its US$800 million covered bond issue in the US s144A market the week before last with a €1 billion covered bond issue in the Euromarket. The six-year bonds were priced at just 17 bps over mid-swaps.



Lastly, Powercor Australia and Citipower announced on Friday that they are considering substituting a common funding vehicle, Victoria Power Networks (Finance) Pty Limited (VPNF), as the issuer of their domestic bonds. The substitution proposal is subject to various conditions, including VPNF obtaining credit rating of BBB+ or equivalent, as assigned to the two current issuers.

At least 50 per cent of Citipower's bondholders must approve the proposal and approval is requested by July 31.