Morgan Stanley, owner of the world’s biggest brokerage, is selling Australian dollar-denominated debt as funding costs near a five-year low spur a surge in issuance.
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. JPMorgan Chase & Co., the biggest U.S. bank by assets, and Westpac Banking Corp. today priced bond issues in the world’s fifth most-traded currency.
“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.”
Issuers sold A$3.8 billion ($3.9 billion) of bonds in Australia today, compared with A$4.5 billion in all of April, according to data compiled by Bloomberg.
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.
Western Australia state, Inter-American Development Bank and Hyundai Capital Services Inc. are planning debt deals, according to announcements today.
JPMorgan today priced five-year Kangaroo notes at 105 basis points more than swaps, according to an e-mailed statement from the U.S. bank. It sold A$450 million of floating-rate securities and A$400 million of fixed-rate bonds.
Westpac added A$725 million to its May 2016 bonds at 47 basis points more than swaps, and increased its January 2018 floating-rate notes by A$600 million at a premium of 73 basis points, according to an e-mailed statement from the lender.
The state of New South Wales’ funding arm sold A$1 billion of notes, while Bendigo & Adelaide Bank Ltd. issued A$600 million of debt.