Tuesday 19 May 2015 by Lincoln Tragardh Week in review

From the Trading Desk

Relatively quiet week in dataflow but volatility in yields and currencies continue; Royal Women’s Hospital and Newcrest USD dominate flows; Qantas 2022 becomes a new DirectBond for retail investors; CML Group commences trading; and Studio City Finance launched as a new USD high yield DirectBond

Economic wrap

It was a quiet week last week in terms of economic news and data. The only notable releases were out of the US, where we saw US retail sales come out flat for April, which was short of expectations of a 0.2% increase. US jobless claims came in better than expected at 264,000 while surveys had the number tipped at 273,000. 

Despite the subdued news and data, markets continued the volatility of previous weeks.

AUD bonds on the whole continued their sell off, with five year Australian Government bond yields increasing by 7 basis points to finish the week at 2.28%, while the ten year rose 8 basis points in yield, finishing at 2.89%. Over the week however bonds traded in a 25 basis point range, with the ten year hitting a high of 3.04%.

In currencies the Australian dollar once again punched through the 80 US cent mark and then continued its rally through 81 US cents, after the US retail sales figures were released. Our dollar finished the week up 0.9 of a cent at 80.34 US cents after trading in a 3 cent range for the week.

Flows

We have continued to see high volume trading in both lines of the Royal Women’s Hospital (RWH). Both the 2033 inflation linked annuity bond (IAB) and the fixed rate bond with a March 2017 with a call date are available. Investors are making the most of the opportunity to add exposure in one of the highest yielding investment grade names in the market, after having recently become available in $10,000 parcels. Indicative offer yields are below:

  • RWH-IAB--30Jun33           5.78% (assuming 2.5% inflation)
  • RWH-6.2%-26Mar17call   5.79% (assuming a 2017 call)

Given the recent spike in both long end yields and the AUD against the USD, we have also seen increased activity in Newcrest’s 2041 bond. The indicative offer yield below:

  • NEWCREST-5.75%-15Nov41 - USD 6.28%

Note: All three of these bonds are only available to wholesale investors.

New DirectBonds

Qantas Airways Limited 7.75% fixed rate bond, maturing 19 May 2022 is now available to retail investors in minimum parcels of $10,000 and is indicatively offered at 5.20%. For further details see the latest research report.

CML Group Limited commences trading as detailed last week, FIIG has recently launched a new $25m floating rate note (FRN) issued by CML Group Limited see article link, ‘FIIG brings another new issue to the Australian high yield market’. The FRN commenced trading on Monday with an indicative two-way market of $100 / $101 and is available to wholesale investors only in minimum parcels of $10,000.

Studio City Finance Limited 8.5% USD fixed rate bond, maturing 1 December 2020 – is a new high yield USD fixed rate DirectBond from a subsidiary of Medco Crown Entertainment which is partially owned by the Australian gaming and resorts company, Crown Limited. The bonds were issued to finance the new Studio City Casino in Macau and are available to wholesale investors only with minimum parcel sizes of USD250,000. They are indicatively offered at $104 cash price (7.60% YTM). The two page factsheet and full research report are now available for you to download.

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.

The most recent Transparency Report is available here.

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