Following on from the A$1.35 billion bond issue by Commonwealth Bank in the domestic market the week before, National Australia Bank became the next of the big four to again issue in volume. In doing so, nab confirmed the new pricing benchmark for five-year issuance.
The CBA issue had a four-year term to maturity but by pricing at 89 basis points over swap/bank bills it was clear that credit spreads are continuing to contract. nab sold A$800 million of fixed rate bonds and A$700 million floating rate notes with a five-year term to maturity and priced at 96 bps over swap/bank bills.
Westpac was the last of the major banks to issue for five years, when it raised a total of A$2.0 billion at 110 bps over, in August.
And just to confirm the new five-year pricing benchmark, Westpac added A$400 million to its August 2014 line at 97 bps over, on Friday. The fixed rate tranche was increased by A$130 million, to take outstandings to A$955 million, and the floating rate tranche by A$270 million, taking outstandings to A$1.45 billion.
With the exception of a small increase to its March 2014 line by Westpac and a couple of small issues by CBA, there has been no sizeable government-guaranteed issuance by the four majors since mid June, when nab added A$1.0 billion to its March 2012 line. Since then the big four banks have issued A$7.25 billion of bonds in the domestic market without a government guarantee.
Obviously market conditions have considerably improved from when the government guarantee was first used in December last year. And as the chart below illustrates, domestic market credit spreads (inclusive of the guarantee fee) for the four majors have now contracted to levels not seen since the first half of 2008.
20090914 chart for Phil
However, it still remains difficult for other banks to issue in volume without a government guarantee, as Suncorp-Metway again demonstrated. It issued A$1.0 billion of four-year bonds split into a A$200 million fixed rate tranche and A$800 million of FRNs. The notes were priced at 38 bps over swap/bank bills but a 100 bps guarantee fee can be added to this.
Bank of Queensland raised A$750 million for three years at the start of July and had to pay 65 bps over swap/bank bills for the privilege plus 150 bps for the guarantee.
As for other domestic corporate bond issuance, Landwirtschaftliche Rentenbank added A$200 million to its July 2014 line. When this line was opened the credit spread was CGS+108.5 bps - the top-up priced at 79 bps over.
ASX Limited subsidiary, ASX Clearing Corp. Ltd., abandoned its plans for a A$145 million bond issue and Standard & Poor's withdrew its preliminary 'A' rating on the bonds as a result.
In New Zealand, ASB Bank added NZ$230 million to its September 2014 line to take outstandings to NZ$500 million. The line was opened this time last year at 130 bps over swap. The addition was priced at 125 bps over.