Monday 25 May 2015 by Lincoln Tragardh Week in review

From the Trading Desk

Greece suggests inability to make its June International Monetary Fund payment, the US expects to start raising interest rates this year, the Australian yield curve continues to steepen, Qantas 2022 bonds became available to retail clients and two Sun Group Finance bonds are added to the DirectBonds list

Economic wrap

Greece was in the headlines again this weekend, with Prime Minister Alexis Tsipras commenting that the country cannot absorb any more austerity measures and Interior Minister Nikos Voutsis stating that the country couldn’t and wouldn’t make the June payment to the International Monetary Fund  (IMF) without a deal from its creditors.

Mixed housing data and uninspiring CPI from the US, coupled with little surprise from RBA and FOMC minutes left for subdued movement in yields last week. Janet Yellen indicated that, all else being equal, interest rates are expected to rise in the US this year – which was no real surprise to markets.

This week, the US releases GDP on Friday – which is expected to shrink by 0.9% (annualised Quarter-on-Quarter). Domestically, there is little in the way of releases this week.

In currencies last week, the Aussie dollar dropped against the US by 2 cents, opening at 80.26 US cents and finishing the week at 78.23 US cents.

Yields seemed to regain some stability last week, with 5 year government yields increasing by a modest 4 basis points to 2.28%. The steepening of the yield curve continued, with 10 year government yields outpacing the shorter end, up 9 basis points to 2.92%.


Trading late last week was dominated by Qantas, with the 2022 maturity becoming available to retail investors. As a result, we saw many retail clients selling out of their 2020 maturity and moving into the 2022s, to take advantage of the steeper yield curve and downside protections inherent in the longer dated bond, whereby the coupon steps up if the company is downgraded by the rating agencies. As of today, if you wanted to execute the switch you would have realised a pickup of circa 24 basis points (bps).

We also added two DirectBonds from Sun Group Finance, the funding subsidiary of the Transurban-led consortium which manages a network of Brisbane toll roads. On the menu is a 2021 fixed rate bond and 2024 floating rate note. We have been especially active in the longer dated floater. It represents a good opportunity to add a quality, investment grade name to your portfolio, without the interest rate risk inherent in fixed and inflation linked bonds of similar tenors. Indicative offer yields below:

  • Sungrp-4.90%-08Dec21          4.09%
  • Sungrp-BBSW+2.05%-16Dec24   4.82% (projected using a trading margin of 1.65%)

You can now download the factsheet’s for either Sun Group bond. Please note these bonds are available to wholesale investors only. The most recent Transparency Report is available here.

Rates accurate as at 25 May 2015 and are subject to change. 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.