Tuesday 20 February 2018 by Week in review

From the trading desk

US CPI beat expectations, weak Aussie employment data, active trades in McDermott ahead of the call date, good supply remains in Cimic 2022, RMBS popular with NAB notes oversubscribed, and investors trade out of  G8 Education’s maturing bond and reinvest the proceeds. Diversify with two new DirectBonds – Emirates NBD and QNB Finance

What’s trading


  • The recently issued Qatar National Bank 2028 was added to the DirectBonds list last week, and is available in $10,000 minimum parcel sizes.  The fixed rate bond pays a 4.90% coupon and is available to clients at an indicative yield to maturity of 4.60%.  The bond is rated a high ‘Aa3’ by Moody’s and single ‘A’ by S&P and has been added to portfolios to form the core holdings of income seeking investors
  • Residential Mortgage Backed Securities remain popular  and we had a few on offer last week – all promptly snapped up by pent up demand.  NAB’s recent issue, the NRMBS-2018 tranche C, D and E notes, were available in limited supply to clients which were five times oversubscribed in the primary market.  The Progress 2017-2 C notes, which have been available previously to clients, were once again on offer – also in limited supply – and have an indicative projected yield of 4.69%.  The bonds have been added to portfolios as a floating rate note exposure in anticipation of possible raising interest rates this year


  • Active trades in oil and gas service provider McDermott International (MDR) last week as clients seized an opportunity to exit positions ahead of a looming optional call date. For the past nine months, MDR has had the option of calling their fixed rate May 2021 senior notes at a capital price of $104 plus accrued interest. This is set to change on 1 May as the covenants allow MDR to call the bonds at $102 from that date, which the market is expecting the company to do. Investors looking to exit prior to the call date can still do so at an indicative yield of 6.22%, and are encouraged to contact their relationship manager for details regarding reinvestment options
  • Industrial service provider Cimic Goup Ltd was active last week following a sizable offer of its November 2022 senior fixed rate bond coming to market. The bond pays a semi annual coupon of 5.95% and is available to wholesale investors in minimum parcels of US$10,000. The bond is still in good supply at an indicative yield of 3.95%

Economic wrap

Last week, US CPI came in higher than expected with core at 1.8% (consensus 1.7%) and headline at 2.1% (consensus 1.9%). That slapped US government 10 year yields 9bps higher on the day to 2.92%, despite a very soft retail sales number that investors chose to completely ignore.

Elsewhere, the Australian employment data was weak; although the 5.5% unemployment rate was in line with expectations as well as the 16,000 jobs created that beat forecast of 15,000, the split was soft between full-time (-49,800) and part-time (+65,900).

Other news – AUD high yield available

Supply of AUD high yield is better than usual. This is rare we highlight some of the bonds below: 

  • G8 Educations 2018 maturing bond continues with some funds flowing into PMP for clients wishing to stay with unrated bonds. Our Research team have an Outperform recommendation on PMP with a Stable outlook. View their comments on this and all the other FIIG originated bonds here. G8 Education’s current yield to worst is 3.79% pa
  • The CFAP exchange and new issue transaction settled last week, where existing FIIG bonds were replaced by new bonds resulting in an upsized new issue of $65m placed to both existing noteholders and new investors (including private and institutional investors). The issue has started trading at a premium. The new CFAP bond’s yield to worst is 7.30% pa
  • Axsesstoday released half year results last week showing an increase in NPAT to $3.2 million buoyed by continuing strong growth in its loan book. The company offers equipment finance in the hospitality and transport sector. We have demand for the floating rate note which is riskier in the capital structure than the fixed rate security, albeit higher yielding. The Axssesstoday yield to worst is 3.42% pa and 5.79% pa for the fixed and floating rate note, respectively
  • Cash Converters (CCV) announced that the company has successfully completed all commitments required under ASIC’s Enforceable Undertaking, where CCV has implemented various changes and ‘best practice’ enhancements to its lending practices. We expect the bond to see some inflows for those who are looking for a short dated instrument and are aware of the refinancing risk. Current yield to worst for CCV is 7.11% pa

It was a US holiday yesterday (Presidents’ Day) so offshore trading will be rather limited for the early part of our week. The Markit PMI index, the FOMC meeting minutes and the Leading Index are all released Stateside later in the week.

Note: Yields quoted were accurate as at 20 February but subject to change