Corporate bond issues hit $30bn for March quarter

Australia’s debt markets have had one of the strongest starts to the year.

Australia’s debt markets have had one of the strongest starts to the year since the global financial crisis, with nearly $30 billion in bonds issued in the domestic market during the March quarter.

The move underscores how large corporations are taking advantage of very low interest rates to lock in cheap financing. This has coincided with a large amount of corporate bond maturities in Australia and New Zealand.

ANZ last week continued the trend with the issue of a $2.5bn, five-year benchmark fixed-rate note. The note was priced at 82 basis points over the bank bills swap rate and ranks as the equal largest single tranche issue undertaken in the domestic market. Commonwealth Bank was the last player to issue the same amount, in mid-2011.

The March quarter debt market issuance of $28.9bn comes behind the first-quarter record of $32.6bn, seen in 2012, according to figures by debt market consultants ADCM Services.

It also trails the $31bn-plus issued in 2010.

ADCM director Philip Bayley said the delay in the raising of US interest rates, combined with a cut to Australia’s official cash rate, had helped spur on issuance. “These factors, combined with significant corporate bond maturities in Australia and New Zealand in the first quarter resulted in strong issuance volumes in corporate bond and structured finance markets,” Dr Bayley said.

He noted that there had been “a clear upward trend over the last 15 months” in domestic corporate debt and structured finance issues.

Offshore, Telstra this month raised $US1bn for 10 years in the US debt market. This is Telstra’s first issue to this market in four years. The latest issue was oversubscribed 3.6 times and saw the bonds priced at 118 basis points over US Treasury bonds.

Meanwhile Australian banks have been racing to Europe’s debt market, raising cheap finance.