Westpac bonds enjoy mixed fortunes

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From Banking Day:

Retail investors in New Zealand have found the terms of two long-term debt issues from Westpac a little hard to take, with the bank selling less debt than it hoped in an offer that closed late last week.

Westpac New Zealand (rated AA- by S&P) returned to the NZ retail market for the second time this year, hoping to raise up to NZ$400 million for five years and up to NZ$500 million for seven years.

While the bank came close to its five-year target, raising NZ$385 million, it fell well short of its seven-year target, raising only NZ$235 million.

It is understood the seven-year tranche was open to retail investors, who were apparently underwhelmed.

Pricing was at the wide end of the indicated ranges with the five-year floating rate notes priced at 185 basis points over bank bills and the seven-year bonds priced at 205 bps over swap.

Westpac fared better in the offshore institutional market where the bank (this time with an offer made at the group level) sold €1.0 billion of seven-year covered bonds against an order book of €1.2 billion.

The covered bonds were priced at a tight 55 basis points over mid-swaps, which should swap back to an Australian dollar cost of around 150 bps over bank bills.

Rabobank Australia (rated AA) also sold term debt offshore last week. It placed A$100 million of three-year Eurobonds at a spread of 124 bps over mid-swaps.

Back in New Zealand, Z Energy (which does not have a published credit rating) revealed more about its plans for a retail bond.

The company will open its latest bond offer on July 18 and will seek up to NZ$150 million for seven years.

The coupon is expected to be set at 6.5 per cent per annum and the offer will close on August 10.

Here is the latest CDS chart for the big four. The last price in Friday was just shy of 160bps and the recent rally looks to have run out of steam in line with the broader stall in risk markets:

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.