Monday 12 March 2018 by Week in review

From the trading desk

Upbeat US jobs data released with US CPI due Tuesday. Frontier announced tender to purchase USD1.6bn of its shorter dated senior notes, NRW Holdings 2020s demand outstripping supply, PMP sees reinvestment as McPherson’s calls its bonds end of March. Emirates NBD prepares for overseas expansion, and new DirectBond from Bristow paying 8.75% fixed coupon

What’s trading


  • Last week, clients took advantage of the NRW Holdings 2020 supply that was available from existing clients switching into other FIIG originated bonds.  Clients sitting on profits chose to sell their position and switch in to a bond that doesn’t pay back 100% of capital over the life of the bond – NRW is a fixed rate amortising bond.  One option is the Lucas 2022 bond that amortises only 40% of capital by maturity and is available at an indicative yield to worst of 6.92%pa. The NRW 2020 bonds remain bid with demand outstripping supply
  • McPherson’s Limited have called early its remaining fixed and floating rate bonds due end of March at $103 and $101.50, respectively.  Clients are able to sell their holdings in either of these bonds prior to the call date and reinvest funds.  This allows clients to beat the rush of funds looking for reinvestment options at the one time, and also removes price and market volatility as clients are able to lock in the price now by purchasing another bond. 


  • US telecom provider Frontier Communications traded heavily late last week after the company announced tender offers to purchase its shorter dated senior notes. The tender will be funded by a private offering of a US$1.6bn second lien secured note paying a 8.5% fixed coupon maturing in April 2026. News of the tender was positively received as some of the bonds are being repurchased at a considerably higher price than recently traded. As a result, the Frontier curve rallied and prompted many clients to exit their positions prior to the buyback, allowing them to capitalise on opportunities to reinvest funds into other high yield USD securities
  • Last week, a new USD security was added to the DirectBond list. Bristow Group Inc. is a leading global industrial aviation services provider. The company has major transportation operations in the North Sea, Nigeria, the US Gulf of Mexico, and in most of the other major offshore energy producing regions of the world. The Bristow 2023 secured bond, rated B+ by S&P pays a semi annual, fixed rate 8.75% coupon. It is available to wholesale clients only at an indicative yield of 7.58%pa.

Economic wrap

US jobs numbers were generally upbeat with the exception of the wages numbers that were weaker than expected at 2.6%, having a downward revision from last month’s 2.9% to 2.8%. Increased labour market demand seems to have also encountered strong supply leading to an unchanged unemployment rate of 4.1%.  

The focus will now move to Tuesday’s US CPI with forecasts of 0.2% for headline and core CPI. Producer prices are also released this week with a 0.2% reading also expected. 

Ten year US Treasuries closed at 2.895% on Friday night, and need a strong CPI number to trade closer to 3.00%.

Other news – AUD high yield available

Emirates NBD is preparing a bid for Turkey’s DenizBank AS according to a Bloomberg story, noting that Emirates NBD is seeking shareholder approval to boost its 5% holding in the Turkish bank to 20%. The overseas expansion of Emirates NBD was mentioned when we DirectBonded the Australian dollar security which we still like, despite its duration. The current yield to worst for the Emirates NBD senior unsecured notes due 2028 is 4.50%pa.

PMP has seen some reinvestment flows from McPhersons who are calling all of their fixed and floating rate bonds on the 31 March call date. The fixed rate bond is callable at $103.00 and the floating rate bond at $101.50.
Our Research team have an outperform recommendation on PMP within the industrials sector. PMP has a yield of 5.868% (to worst) at maturity in September 2019.

As mentioned, Bristow is a new US dollar DirectBond available to FIIG wholesale clients. The Bristow Group are an aviation services provider, primarily to a broad base of major integrated national and independent offshore energy companies. The bond is rated B+ by S&P and pays coupons of 8.75% semi annually. Click here to view the factsheet.