Tuesday 27 February 2018 by Leigh Winton Week in review

From the trading desk

Fed’s inflation gauge anticipated this week, Sprint returns to the high yield bond market, USD bonds from the Aussie resources sector in demand, investors sell off Qantas to switch into the oil sector and investors add QNB’s highly rated notes. We encourage reinvestment of G8 Education’s maturing bond funds while AUD bonds remain in good supply 

What’s trading


  • The Qantas curve was popular last week, as  positive 1H18 results saw  the curve contract to it tightest on record. The positive results together with higher expected oil prices  had clients look to take profits and/or switch into the oil sector. A popular switch was into offshore oil rig operator Transocean’s 9% 2023 bond. Currently, investors can exit their positions in the Qantas 2020 bond at an indicative yield to worst (YTW) of 3.35% pa, the Qantas 2021 bond at 3.48% pa, and the Qantas 2022 bond at 3.61% pa
  • Teacher’s Mutual Bank (TMB) was also active last week, and we managed to pick up a reasonable sized parcel of its BBSW+2.80% 2022 callable bond, rated Baa3 by Moody’s. This bond is comparable to the Bendigo BBSW+2.80% 2021 callable bonds, however yielding 80bps more with investors purchasing the TMB bond at a YTW of 4.42% pa. Due to the small size of the issue, we don’t expect to see too much more supply in this name 
  • The recently issued Qatar National Bank 4.9% 2028 bond has seen significant trading this past week with many clients eager to add its highly rated paper to their portfolios. Supply in the bond remains good, however we expect it may  become scarce over the next few weeks. Currently, investors can purchase this bond at an indicative YTW of 4.47% pa


  • US Telecommunications provider Sprint Corp became a focus last week following its return to the high yield bond market after three years, raising US$1.5bn via a new eight year senior unsecured bond. The issue was upsized from the original US$1bn offer amount due to high demand, and priced at the low end of guidance at 7.625%. FIIG clients focused on the shorter dated February 2025 senior unsecured bond issued in early 2015. The 2025 experienced a significant price drop in November following a very difficult 2017 for the US telecom sector. Paying a fixed rate, semi annual coupon of 7.625%, the February 2025 bond is available to wholesale clients at an indicative yield of 7.00% pa
  • The Australian resources sector was also a focus last week with industrial service provider CIMIC Group Ltd, and mining services company Barminco Finance both experiencing decent demand. Supply is still available in both the investment grade CIMIC November 2022 senior bond, and the high yield Barminco May 2022 senior bond. Client’s looking to add a position to their portfolio can expect to do so at indicative yields of 3.94% pa and 6.44% pa, respectively

Economic wrap

This week, the focus for investors – bond and equity alike – will be the PCE deflator. This is the Fed’s preferred inflation gauge and is expected to print at 1.7% year over year. If the actual figure comes in higher than expected, then the bond (and equity) markets may get a few butterflies.

Other news – AUD high yield available

G8 Education’s maturing bond funds are due into accounts the week beginning Monday 5 March. We are now trading longer settlement periods to help clients reinvest.  As we have good supply of many Australian dollar bonds, to avoid returned G8 funds being underutilised in cash deposits, holders are encouraged to make their investment choices sooner rather than later.

US high yield telecommunication company, Sprint has seen buying interest. Its 2025 bond has a 7.625% pa coupon and is rated by S&P as single ‘B’. The bond was trading around $115 mid-2017 but the price has retreated back towards $104.00. This bond is currently available at a yield to worst of 7.01% pa.

Our offshore research provider has an Outperform on Sprint, noting their expectation for renewed support by Softbank who is the largest equity holder. From a risk perspective, the potential for weak results is noted from increased capex pressures. The factsheet is attached.

In the investment grade space, Australian dollar interest continues in the highly rated bonds from Emirates and QNB.  As for the USD, there is still some CIMIC supply available for clients looking for a yield close to 4% for an investment grade name. The indicative yields are as follows:

  • Emirates 4.75% February 2028 – 4.46%
  • QNB 4.90% February 2028 – 4.53%
  • CIMIC 5.95% November 2022 – 3.94%

Both CML and IMF Bentham announced results last week with an update from our research team available in coming weeks. CML’s fixed rate bond is callable at $104.00 on 18 May 2018 and is available at an indicative yield to worst of 2.84%. The floating rate note can also be called on 18 May 2018 and is available at a yield to worst of 3.67% pa.

Note: Yields are indicative only and subject to change. Please call your local dealer for more information.

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