Tariff volatility sparks rethink on bond issues

Raising money in the corporate bond market typically requires stable conditions.

Thursday’s market volatility linked to US President Donald Trump’s tariff announcement has caused Australian corporates to do a rethink about raising money through the bond market.

Sources say that the Australian engineering group Worley made it known last week that it had a corporate bond coming, but this week, no deal has emerged.

Aurizon also told investors that it was raising through the bond market in recent days. It said that a roadshow was taking place this week regarding a potential new issue of Australian dollar-denominated benchmark-sized subordinated notes.

Any issuance would be subject to market conditions and if undertaken, would be announced accordingly, Aurizon said.

Meanwhile, the market is still waiting to learn if Chemist Warehouse owner Sigma is moving forward on a convertible bond raising, but chances are the deal is off for now.

Raising money in the corporate bond market typically requires stable market conditions, as they offer greater predictability and lower risk for both issuers and investors.

But Thursday proved that the current market conditions are anything but that with billions wiped off the ASX early on Thursday as President Trump announced a 10 per cent baseline tariff for all goods entering the US, except from Mexico and Canada, from April 5.

Some economists are predicting an even deeper correction.

This compares with January when volatility was low and there were expectations of better economic conditions and falling interest rates. Higher yields were being offered, which had not been seen for some time.

Bond raisings last year from high-quality companies were also greeted with overwhelming ­demand.

DataRoom reported in February that HSBC has launched its first-ever subordinated bond in Australia, with a record order book for a subordinated bond at $5.8bn.