Rounding off the week was
OESTERREICHISCHE KONTROLLBANK, which
added A$25m to its 3.50% August 2027s,
taking the total outstanding to A$180m.
Sole-led by TD Securities, it priced the issue
at 59bp over asset swaps, 64.5bp over
ACGBs.
ALBERTA TAPS TWO KANGAROOSPROVINCE OF ALBERTA, rated Aa1/A+
(Moody’s/S&P), tapped its 3.60% April 11
2028 Kangaroo bond for A$50m last
Wednesday, increasing the issue size to
A$360m.
RBC Capital Markets was sole lead
manager on the reopening, which priced
at 101.580 to yield 3.415%, 60bp and
63bp over asset swaps and the May 2028
ACGB.
Two days later, Alberta added A$55m to
its 3.10% December 14 2026 line, lifting the
issue size to A$305m.
RBC was also sole lead on this tap,
priced at 97.678 to yield 3.405%, 56bp and
63bp over asset swaps and the April 2026
ACGB.
IBRD HITS KAURI SWEET SPOTINTERNATIONAL BANK FOR RECONSTRUCTION AND
DEVELOPMENT, the World Bank’s funding arm,
rated Aaa/AAA, raised NZ$700m (US$510m)
FROMûLASTû4HURSDAYSûSALEûOFûlVE
YEARû+AURIû
bonds.
The 3.0% February 2 2023s priced to yield
3.076%, 33bp wide of mid-swaps and 62.6bp
over the April 2023 NZGB.
ANZ, BNZ and CBA were joint lead
MANAGERSûONûTHEûFOURTHûSUPRANATIONALûlVE
year Kauri issue of the year.
On January 5, Nordic Investment Bank
raised NZ$400m at mid-swaps plus 35bp.
Asian Development Bank and Inter-American
Development Bank paid 34bp mid-swap
margins for their respective NZ$500m and
NZ$375m prints on January 9 and January 12.VICTORIA WORKS ON TWO TAPSTREASURY CORPORATION OF VICTORIA, rated Aaa/AAA
(Moody’s/S&P), has mandated Bank of America
Merrill Lynch, Deutsche Bank, NAB and UBS as
joint lead managers for taps of its 3% October
20 2028 and 4.25% December 20 2032 bonds.CORPORATES
US DOLLARS
GE BONDS WIDEN ON BREAK-UP TALKGENERAL ELECTRIC bond spreads widened on
Tuesday after the company said it was still
thinking about breaking itself up.
GE also announced more than US$11bn in
charges from two sources: its long-term care
insurance portfolio, and a one-time charge
related to changes in US tax law, according
to a Reuters report.
The company’s 5% January 2049s gapped
out by as much as a whopping 56bp by
Wednesday, before tightening 10bp a day
LATERû4HEûNAMEûWASûONEûOFûTHEûTOPûlVEûMOSTû
heavily traded bonds in the US corporate
market by Thursday, according to Market
Axess data.
“Investors have no reason to hold onto a
name given that type of noise and
headlines,” a syndicate banker said.Record demand for Aussie sovereign
SSAR Offshore investors lap up November 2029s despite narrower spread over US TreasuriesThe AUSTRALIAN OFFICE OF FINANCIAL MANAGEMENT
drew a record order book for last Wednesday’s
A$9.6bn (US$7.25bn) November 21 2029
government bond, underlining the country’s
continued appeal even at a tighter spread over
US Treasuries.
The A$21.2bn book for the new 2.75% notes
eclipsed even the A$20.9bn of orders for
the A$11.0bn 2.75% November 2028 T-bond
sold in February 2017, which remains the
largest syndicated Australian Commonwealth
Government bond.
Leads were pleased to see broad-based
buying from overseas investors given concerns
that offshore demand may recede as the ACGB
spread over US Treasuries moves towards zero.
“Such a large deal shows the limited impact
from the narrowing differential, so far. It also
shows that last year’s A$11bn and A$9.3bn
trades were actually the start of a significant
increase of demand and capacity, allowing the
AOFM to access it if required,” said Rod Everitt,
head of Australian syndicate at Deutsche Bank.
The scale of interest allowed joint lead
managers CBA, Citigroup, Deutsche Bank and UBS
to price at the tight end of EFP (10-year futures)
plus 7bp–10bp guidance for a yield of 2.86%.
Offshore bidding was notably robust. The
32% allocation to foreigners was more thandouble their 15.3% share for last February’s
long 10-year benchmark, despite a decline in
Australian Commonwealth government bonds’
yield pick-up over 10-year Treasuries from 43bp
to 23bp.
The Australia/US 10-year spread has tightened
from more than 80bp in April 2016, 135bp at the
beginning of 2014 and a near 300bp peak during
the global financial crisis in 2008.
Australia still offers the highest absolute
yields of the 10 countries currently rated Aaa/
AAA/AAA by the three main agencies.
Last Thursday’s 2.79% yield for the ACGB 10-
year benchmark compared with Triple A rated
German and Canadian 10-year yields of 0.57%
and 2.20%, while lower-rated 10-year Gilts and
JGBs were yielding 1.30% and 0.08%.
Asian accounts bought 11.6% of the new
ACGB, up from 9.2% for February 2017’s issue.
North America, the UK and Europe took 8.0%,
5.9% and 5.8%, versus 0.4%, 1.6% and 3.8%,
previously. Others received the remaining 0.6%.
Bank balance sheets picked up 34.9%, bank
trading 26.1%, fund managers 16.6%, hedge
funds 14.5%, central banks 7.7% and others 0.3%.DECLINING DEFICITS
Rollover demand from the maturing A$9.6bn
5.5% January 21 2018s supported thetransaction, which also enjoyed some scarcity
value as the last syndicated nominal bond sale
of fiscal year 2017–18.
The improving fiscal outlook is another
positive. Last month, the AOFM reduced to
A$74bn from A$80bn its projected gross T-bond
offerings for 2017–18 in the federal government’s
updated economic and budget forecasts.
With A$31bn of maturing bonds and around
A$15bn of buybacks, net issuance is estimated to
be around A$28bn.
The Australian federal government cash
deficit is modest by international standards.
It is projected to be A$23.6bn, or 1.3% of GDP,
in 2017–18, falling to A$20.5bn (1.0% of GDP)
in 2018–19 and just A$2.6bn (0.1% of GDP) in
2019–2020. The Treasury forecasts a return to
surplus in 2020–2021 of A$10.2bn (0.5% of
GDP), while net sovereign debt is expected to
remain below 20% of GDP.
In conjunction with Wednesday’s issue, the
AOFM repurchased three outstanding short-
dated T-bonds.
It bought back A$22m of the 3.25% October
21 2018s, A$1.804bn of the 5.25% March 15
2019s and A$1.165bn of the 2.75% October 21
2019s at respective yields of 1.69%, 1.78% and
1.92%.
John Weavers