Monday 18 July 2016 by Trade opportunities

BHP bond prices rally up to 20% in 2016


BHP subordinated bond prices have recovered well since the lows experienced at the start of the year

BHP bond prices are up between 15% and 20%, with US dollar bond prices up to around USD110 from lows of USD93 seen in January. The figure below highlights this:

Source: FIIG Securities

While we remain supportive of BHP’s credit profile, now may be a good opportunity to consider taking profits with bond prices at their highest levels since issue in October 2015. The figure above shows that BHP bond prices have historically been volatile and a strategy of taking profits may suit investors who are concerned about the risk of another downturn in the commodities sector or further strengthening of the Australian dollar. The USD and GBP lines have been the most actively traded with the following levels seen during July 2016:

  • USD 6.25% 2020^ subordinated bond: USD106-110 (YTW: 3.70%-4.70%*)
  • USD 6.75% 2025^ subordinated bond: USD106.50-111.50 (YTW: 5.15%-5.80%*)
  • GBP 6.50% 2022^ subordinated bond: GBP103-110 (YTW: 4.60%-5.80%*). Note the higher volatility in this line has been due to Brexit

Please contact your FIIG representative for further details on the BHP subordinated bonds. Available to wholesale investors in minimum face values of USD200,000 and GBP100,000 for the respective currencies.

^Year of first call date

*YTW stands for ‘yield to worst’, which in this instance is currently the yield to the first call date.