From Banking Day comes the news that on Friday:
…Westpac priced the Series 2013-1 WST Trust. The A$1.9 billion class A tranche, with a weighted average life of three years, was priced at 85 basis pointed over the one-month bank bill swap rate.
Pricing on the $71 million class B tranche and the $97 class C tranche was not disclosed.
Westpac launched the deal earlier in the week seeking $750 million, but it ended up issuing $2.1 billion.
These are pre-European crisis rates, though still well above pre-GFC rates. Checking in on the CDS market, which is an excellent proxy for long-term wholesale yields, on Friday prices hit their lowest levels since late 2010 and look likely to finally breach the European crisis floor of 100bps:
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.
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So about 1.85% plus hedging costs?
What is your estimate for hedging – 50bps ?
Issued in AUD, so no cross currency swap involved. Suspect total cost is BBSW +c1.2%. cf home loans being shovelled out the door in the mid to high BBSW +2%s. Securitisation is baaaaack. Not great news for bank margins
Probably closer to BBSW+100bps at issue. But this will slowly rise as the A notes are paid out.
Although banking and investment experts like Fix Zulauf are not so sanguine about the current state of affairs.
Download/listen
Same goes for Egon von Greyerz:
Download/listen
Both seem to be saying that this is a temporary, at best, situation.
Zulauf has only been wrong for the past 3 years. Guess he might get it right at some stage
Heads up, DLS.
Jim Rickards: Currency War 3 Has Just Begun
(Jim is the author of the book “Currency Wars” and is one helluva smart guy).
I hope this is a temporary situation. The last thing the AUD needs is cheap offshore funding flowing through the banks into the open arms of confident consumers.
That was always the trap that awaited an easing campaign…
Can they actually load up Australia with more private debt? Staggering – but I’m betting yes (for a while).
But with the ToT rolling over this will be compelling viewing.
I reckon we can push the stone up the hill a little further!
How does cheaper debt solve a debt problem, in a system reliant on increasing levels on debt?
Hmmm…