Investor confidence returning quickly
The weak phase in the bank debt market lasted around 12 weeks, if the debt marketing strategy of National Australia Bank is any guide. NAB yesterday tapped its April 1, 2013 fixed- and floating-rate bonds, adding A$325 million to the fixed-rate tranche and A$675 million to the floating-rate tranche. The increases take outstandings to A$1.23 billion and A$1.28 billion respectively, and mark the first issuance by NAB in the domestic market since the lines were opened on March 26.The NAB issuance also follows a private placement by Westpac almost three weeks ago, in which it added A$750 million to that bank's 19 April 2013 line. NAB priced its tap yesterday at 85 basis points over swap/bank bills, an increase of just eight bps over the original issuance level. Westpac managed to get its tap away just sevens bps wider, at 83 bps over bank bills.This latest issue from NAB confirms that there is investor demand for credit risk at margins that are not a great deal wider than they were before the onset of the GFC II. Just how representative the outcome of this tap is remains open to question, with CDS spreads for three-year senior debt from the four major banks currently sitting around the mid 90 bps: but this is better than a week ago when three-year spreads were at 117 bps. It also provides confirmation that investor confidence is returning relatively quickly to financial markets. The major Markit CDS indices for North America, Europe and Australia have all turned sharply down over the last two to three weeks.KfW also launched and priced a A$250 million increase to its March 2017 line. Priced at 105 bps over CGS, the increase takes outstandings to A$1.45 billion.