Morgan Stanley (MS), owner of the world’s biggest brokerage, and Westpac Banking Corp. are marketing sales of Australian dollar-denominated debt as funding costs drop to near the lowest in five years.
Morgan Stanley is offering 5 1/2-year notes at about 160 basis points more than the swap rate, said a person familiar with the matter, who asked not to be identified as the terms aren’t set. Westpac, Australia’s second-largest lender, is selling notes due in May 2016 and January 2018. JPMorgan (JPM) Chase & Co., the biggest U.S. bank by assets, said yesterday it is also seeking to issue in the world’s fifth most-traded currency.
Borrowing costs for lenders have plummeted as central banks around the world engage in unprecedented monetary easing, spurring demand for riskier assets. Premiums on financial company debt in Australia average 105 basis points more than swaps, Bank of America Merrill Lynch indexes show. The gap was 104 on March 28, a level unseen in five years.
“Credit spreads have contracted quite noticeably of late and we’ve also had a bit of a lull in issuance,” said Ken Hanton, senior credit analyst at National Australia Bank Ltd. “After a period of relative inactivity you’re always going to get borrowers coming back to the market.”
Bond sales in Australia last month dropped to A$4.5 billion, less than half the A$9.3 billion sold in March, according to data compiled by Bloomberg.
JPMorgan is marketing its five-year Kangaroo notes at 105 basis points to 110 basis points more than swaps, according to its statement.
Westpac (WBC)’s 2016 securities are being offered at a premium of about 47 basis points, while the 2018 notes are being marketed at a 73 basis-point spread, said a person familiar with the matter.
Bendigo & Adelaide Bank Ltd. (BEN) is planning to sell four-year floating-rate notes today, which will yield about 120 basis points more than the bank bill swap rate, another person said.
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