Pricing constrained for major banks

ANZ became the first of the four big banks to issue in the local market for the year when it approached the market with a minimum A$500 million, four-year bond issue, with an indicative pricing range of 95 to 98 basis points. There was sufficient investor demand for the bank to upsize the ANZ issue to A$1.8 billion of bonds (A$600 million fixed and A$1.2 billion floating) and priced at the bottom end of the range.

The pricing of the ANZ four-year issue at 95 bps over swap and bank bills warrants some comment, however, as it provides further evidence of the extent to which risk aversion has returned to the market.

Comparisons have been made with ANZ's A$1.25 billion five-year issue in November 2009, which was priced at 100 bps over.

This is fair enough and suggests that the pricing is about right and that market conditions have not improved since early November. But it is also worth noting that in September the four major banks were achieving prices of 78 bps, 89 bps and 96 bps for three-, four- and five-year unguaranteed bonds.