Month-end rush in the corporate bond market
There was a burst of activity in the domestic corporate bond market last week, with 10 issues being launched in the last week of the month. Surprisingly, six of the issues came from the SSA (sovereign, supranational and agency) sector, which has been relatively quiet while the Australian dollar has been falling. All the issues were relatively small. The Sydney branch of HSBC (AA-) priced the largest issue of the week. This was a A$750 million, three-year floating rate note (FRN) issue, priced at 67 basis points over bank bills.Colonial Holding Company (A+) also issued a three-year FRN issue, to raise $200 million, and paid 120 bps over bank bills. GE Capital Australia Funding (AA+) sold $200 million of seven-year bonds, priced at 130 bps over swap, and Stockland Trust (A-) returned to the market for the first time since December 2010.Stockland launched a minimum $100 million, six-year bond issue, with indicative pricing of 170 to 175 bps over swap, on Friday morning. In the afternoon, it priced a $150 million issue at 170 bps over swap. Among the SSA issuers, Asian Development Bank (AAA) started the week with a $250 million addition to its July 2018 line and also opened a new 10-year line. The latest July 2018 bonds were priced at 65 bps over Commonwealth government securities (CGS) and takes the total outstanding to $650 million.The new August 2023 bonds amount to $150 million and were priced at 78 bps over CGS.The Latin American development bank, Corporacion Andina de Fomento (AA-), added $75 million to the $275 million of three-year bonds it had issued the previous week. Pricing was 3.5 bps tighter, at 171.5 bps over CGS.Inter-American Development Bank (AAA) put in an appearance, adding $150 million to its September 2017 bonds. The increase takes the outstanding bonds to $875 million. It was priced at CGS plus 55 bps. KfW (AAA) added $300 million to its July 2016 line, to take the volume of bonds outstanding to $2 billion. This is the eighth addition to the line since it was opened in January 2006. It was priced at 45.75 bps over CGS.African Development Bank completed the SSA issuance for the week, with the sale of just $100 million of bonds; these have a March 2024 maturity. The bonds were priced at CGS plus 95.5 bps.This is the largest number of SSA issuers in one week so far this year. The small issue sizes suggest they have been largely driven by reverse inquiry.Offshore, ANZ continued to tap covered bond investors, selling €1 billion of five-year covered bonds priced at 17 bps over swap. The bonds were priced against an order book of €1.2 billion. ANZ sold €1 billion of seven-year covered bonds in May at the same spread.