CBA Sells First Australian Senior Bank Bonds in Two MonthsBenjamin Purvis
Commonwealth Bank of Australia sold A$1.25 billion ($1.15 billion) of four-year floating-rate notes, a person familiar with the matter said, the first senior bank bond issue in the lender’s home country in almost two months.
CBA sold the July 2017 paper to yield 85 basis points more than the bank bill swap rate, according to the person, who asked not to be identified because the terms are private.
Bond issuance in Australia last month slowed to the least in a year and a half as the prospect the U.S. central bank may pare record stimulus caused a global blowout in benchmark yields and credit spreads. The last sale of senior bank debt in Australia was on May 23, when Bank of Queensland issued A$325 million of bonds.
National Australia Bank Ltd.’s A$1.2 billion sale of five-year notes on May 16 was the most recent senior transaction by one of country’s four biggest lenders. That deal, which included both fixed- and floating-rate notes, was priced to yield 78 basis points more than swaps.
Issuers abandoned the market after Federal Reserve Chairman Ben S. Bernanke’s comments about a possible reduction in asset purchases sent borrowing costs soaring. Financial company bond yields in Australia rose to 4.55 percent on June 24 from 3.90 percent on May 8, Bank of America Merrill Lynch data show.
The average yield premium for Australian bank paper over the swap rate climbed to 130 basis points on July 2 from 102 at the end of May, the least since February 2008. It has since fallen back to 122.
While CBA is the first bank to venture back into the senior market, there has been activity in the domestic hybrid market. Australia & New Zealand Banking Group Ltd. last week allocated A$1 billion of subordinated hybrid notes, while Westpac Banking Corp. is also offering subordinated debt, according to statements from the lenders.
Sale opportunities for non-bank borrowers are also showing signs of growth, with Perth Airport Pty selling A$150 million of seven-year notes at 205 basis points more than the swap rate, according to an e-mailed statement from joint sale manager Westpac. The transaction is the local market’s first from a non-financial company since before Bernanke’s news conference on June 19, according to data compiled by Bloomberg.