Australia’s latest bond raisings are offering further evidence that investors in that market believe high interest rates will be more short-lived than many in the broader market expect.
The latest offerings in the market include a Tier Two Capital bond from NAB, where it is issuing subordinated debt, and a Green Bond from Melbourne University.
NAB’s raise is expected to be worth billions of dollars, as banks are pressed to meet capital standards, and it includes a fixed and floating tranche.
Recent deals where fixed and floating tranches have been offered have seen the fixed option fly out the door at strong prices, given that anticipated interest rate rises from the Reserve Bank of Australia are baked into the floating rate.
With the take up so strong for the fixed rate bond options, it shows that there are investors prepared to take a bet on rates not increasing too substantially, say experts.
Melbourne University’s Green Bond offers a 7-year fixed rate with a yield of 4.5 per cent to raise up to $200m.
Working on that transaction is CBA and HSBC.
NAB is offering 2.9 per cent over the Bank Bill Swap Rate and it could be into the billions, say sources.
CBA and Macquarie have both issued similar bonds with a fixed and floating rate, and in both cases, the fixed rate has proved to be popular.
For the Macquarie bond, the fixed option price is 6.08 per cent, which is 200 basis points over the five-year Bank Bill Swap Rate at the time of the deal.
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