Tuesday 31 March 2015 by Lincoln Tragardh Week in review

From the Trading Desk

This week: US February CPI released and fourth quarter GDP revised down; Greek bailout uncertainty drags on; good flows based on the new issues mean there’s a wide variety of bonds available; and James Hardie International Finance Ltd 5.875% 2023 now available as a new USD DirectBond (wholesale investors only).

Economic wrap

Last week we saw some key data come out of the US, including inflation and GDP.

Inflation (CPI) figures were released for February, with prices up 0.2% for the month compared to a 0.7% fall in January. The year-on-year figure was flat, however when food and energy are excluded, prices were up 1.7% on last year.

We also saw a data revision come through for fourth quarter US GDP growth, which was adjusted down to 2.2% annualised, from the previously published figure of 2.4%.

With the US Federal Reserve stressing the importance of stronger inflation and GDP data before they apply any rate increases, markets deferred their expectations for rate increases out beyond June.

In the Eurozone, further doubt was raised in relation to the Greek bailout program. With officials meeting in Brussels over the weekend it became clear that revised Greek bailout proposals, including plans to deliver a EUR3bn budget surplus, would be inadequate to satisfy creditors’ concerns. As a result, the cash strapped country will likely need to go through several more weeks of negotiation before creditors release further bailout funds.

Over the weekend, the Liberal National Party Coalition retained government in NSW while earlier this week Treasurer Joe Hockey presented the Abbott Government’s tax discussion paper. The paper “begins a dialogue on how we create a tax system that supports higher economic growth and living standards, improves our international competitiveness and adjusts to a changing economy and new opportunities”. The main issues raised in the paper were the prospect for a reduced corporate tax rate, the potential for a lower or zero tax rate for small business and the review of the GST.

Last week yields were up slightly; our 5 year government bonds were up 2 basis points to 1.88% and our 10 year up 3 basis points to 2.41%.

In currency markets the AUD was relatively flat against the USD, down about 0.25 of a cent to 77.52 US cents. This week however we’ve seen a further sell off, with the AUD trading at around 76.50 US cents at the time of writing.


FIIG has recently completed two new bond issues (Dicker Data Ltd and McPherson’s Ltd) totalling $100m. Again we highlight the supply of bonds in existing names that these new issues bring, with clients switching out of existing holdings to fund new deals. We highlight these opportunities in the article Strong supply presents an opportunity.

Silver Chef – Outcome of proposed amendments to conditions of unsecured notes

The proposed amendment to the Terms and Conditions of SIV’s unsecured notes has been passed. Please click here to see the ASIC announcement.

New DirectBond – James Hardie International Finance Ltd 5.875% 2023 (by Will Arnold)

James Hardie International Finance Ltd is a wholly owned subsidiary of James Hardie Industries plc which manufactures fibre cement building materials. James Hardie is the largest fibre cement producer in North America, Australia and New Zealand with about 90% market share in the United States in the fibre cement category. The company is embarking on an expansion plan with increased capex that will decrease credit metrics however the group expects a corresponding increase in revenue post expansion.

The bond is offered indicatively at around 5% YTM. The factsheet for this bond can be viewed by clicking here (for wholesale investors only, login required).

All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities. For more information, please call your FIIG representative or our general line 1800 01 01 81.