Big fall in ten year Govt stock this week, about 60 bps. Closed about 3.7% down from 4.3% a couple of weeks ago. Are we headed lower still ?
Are good quality medium term corporate bonds good buying at over 5% or is this just a head fake and we have a lot more wood to chop with inflation so the capital losses in the bond market could continue ? Are you're better off staying short with your money ? e.g. Heartland just announced a term deposit of 4.0% for 1 year yesterday. Thoughts ?
Who knows.
Governments will keep throwing money at the plenty problems the world currently has (war in Europe, pendemic, global warming) ... this is clearly inflationary.
Public and private debts will keep rising faster than ever ... and the only way to pay unaffordable debts is by defaulting or by inflating them away. Both is inflationary.
Whoever looses the current war is likely not to be able to pay back their debts. Better make sure not to deal with banks who give money to loosers.
On the other hand:
Oil-price unlikely to double another time in a couple of months, isn't it? Some other greedy autocrats will always try to make hay while the sun shines and they will sell their basically unlimited supply of oil before the world moves too fast (for them) to green energies.
Transport and shipping is as expensive as never before (not just due to the oil price but due to Covid inflicted issues). High prices are always the most effective enemy of high prices - i.e. transport cost more likely to come down over the coming months rather than further increase.
Hard to say which arguments will prevail in the short and medium term. I have a leg in both camps ... but start slowly to increase my bond portfolio. Balanced is good :) ;
I'm staying short.
10% bonds and 90% short term bank deposits.
Expect the unexpected.
https://www.cnbc.com/2022/07/01/us-bonds-10-year-treasury-yield-in-focus-on-recession-fears.html
My core thesis remains we are either in recession already or headed into one and its looking increasingly likely we have seen the peak of 10 year bonds for the foreseeable future.
Last time I looked yesterday our 10 year Govt stock rate was down to 3.50% a full 80 points down from it recent peak.
I think very high quality ~ 5 year corporate bonds, the likes of power companies and high quality corporates like SUM are good buying in the 5 - 5.5% range and slightly lesser quality corporate bonds like OCA are good buying in the 5.50 - 5.80% range.
Higher yields are available on the likes of Synlait bonds at a touch over 8% but I am not interested in the risk involved there. I'd rather take an equity risk on a decent company like TRA or GNE to achieve an 8%+ return with equity upside.
Westpac Bank – Subordinated Notes
Westpac New Zealand Limited (WBC) has announced that it is considering an offer of subordinated notes.
The notes are expected to have a 10-year maturity date but may be repaid after 5 years if certain conditions are met.
At this stage the interest rate has not been set but based on comparable market information it is likely to offer an interest rate of around 5.75% fixed for the first 5 years. After 5 years the interest rate will be reset to a new interest rate (unless the Notes are repaid on this date).
The notes have a strong credit rating of A-
Todays news from interest.co.nz
The big news today is the raising on the one year Kiwi Bond rate by +25 bps to 3.50%. Their six month rate is unchanged at 3.00%. These effectively set the risk-free rate boundary for term deposits. Why would you take less from a lower-rated bank than the high-rated NZ Govt?.
Westpac Bank – Subordinated Notes
Forecast to be near or on 6% and with WBC an -A .
Average return on the stock market is what? 6-8% .
At my ripe old age I'm happy to fill my boots with this offer.
Arnt these tier 2 bonds?
Transpower – Senior Bonds
Government owned Transpower has announced that it has launched a 5-year senior bond.
At this stage the interest rate has not been set but it is likely to offer an interest rate of around 4.60% fixed for 5 years. After 5 years the bonds will be repaid.
The bonds have a strong credit rating of AA.
Chris Lee...
Quote from: mcdongle on Sep 06, 2022, 09:24 AMArnt these tier 2 bonds?
Yes but they still have a credit rating of A- and a yield north of 6% so I put my hand up for a few.
6.19% was the yield. Happy with that.
Yes i held my hand out for a few as well...
I put my hand up for a few too. Were you guys scaled? As I only got 60% of what I asked for. Seems it was popular.
No, I got what i wanted
Quote from: mcdongle on Sep 10, 2022, 10:05 AMNo, I got what i wanted
That's good. Do you mind if I ask what broker you are with? As I'm looking to change it has been interesting lately seeing different results and scalin via different brokers for HGH, Manawa etc and I'm starting to think the broker you're with rather matters when putting your hand up for these things
have pmd you
Quote from: Glenorchy on Sep 09, 2022, 04:37 PMI put my hand up for a few too. Were you guys scaled? As I only got 60% of what I asked for. Seems it was popular.
Got all I asked for.
I got 58% of what I applied for through Jarden.
Thanks Kiwi and Basil. It seems some brokers weren't scaled at all and others were scaled quite a lot. I guess I'll have to give some thought to who I purchase bonds through although Jarden's were a joint lead manager so there goes my theory that applying through a lead manager might be a better strategy ;D
Opinions on the new Napier Port bonds?
Quote from: Raven on Sep 12, 2022, 04:30 PMOpinions on the new Napier Port bonds?
Im not too keen on this one, But thats just me.
Quote from: Raven on Sep 12, 2022, 04:30 PMOpinions on the new Napier Port bonds?
ASB has a pretty good credit rating and issued it's last 5 year fixed rate bond at 5.5% so I"m not sure bonds that pay less are attractive for me but I hear this will be very popular and oversubscribed so clearly a lot of people are putting their hands up. I'm old enough to remember the last time we lost control of inflation ( I think most people in most countries are all still being too optimistic about how quickly that peoblem gets solved) so I'm keeping some powder dry I think we have some way to go and more offers will arrive.
This is Bonds and Banking but on another level..
https://www.reuters.com/world/asia-pacific/australias-central-bank-has-equity-wiped-out-by-billions-bond-losses-2022-09-21/
I see Kiwibank is going to be bringing a 5 yr note to the market next week. Interest rate 5.5%+ A rated. Quite similar to the ASB offering.
I have done a lot of reading over the weekend and I'm feeling less certain than I was (and I wasn't very certain before) it does look as if inflation may go higher than has previously been projected. ANZ's Zollner is now saying OCR will go to 4.75 I don't know if it will or not our bank economists don't have much of a track record for getting anything right but if it does then you'll be able to get 5.5+ for a year in the bank on a pie term deposit before long. This is making me pause a little on the bonds. They're a small part of my portfolio less than 15% currently but perhaps I'll just keep it that way... mulling it over.
I'm hitting pause on bonds as well. Who really knows where interest rates go from here ?
I looked at the Kiwibank bonds as well, But this put me off.
Kiwibank does not intend to quote these Notes on a
market licensed in New Zealand but they will be
able to be traded through dealers on established
'over-the-counter' markets. This means that you
may be able to sell them through dealers on
established 'over-the-counter' markets before the
end of their term if there are interested buyers. If
you sell your Notes, the price you get will vary
depending on factors such as the financial
condition of the Banking Group and movements in
market interest rates.
Page 2 of the key Information summary..
Hi, does anyone know what the tax situation is on bonds that are bought 'under par?' Is the capital gain taxed when they are redeemed or you sell them for more than you paid? Thanks.
Quote from: kiwi2007 on Oct 07, 2022, 03:13 AMHi, does anyone know what the tax situation is on bonds that are bought 'under par?' Is the capital gain taxed when they are redeemed or you sell them for more than you paid? Thanks.
I'm not an expert in this field but I believe they are classified as a financial arrangement and any discounts on purchases that are held to maturity are subject to tax:
https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-income/interest-and-dividends/financial-arrangements-rules
Although that link talks more about methods rather than bonds per se.
Thanks Ferg. That makes sense. Cheers.
Air New Zealand (AIR) has announced that it plans to issue a 5.5-year senior bond.
The interest rate has not yet been fixed, but it has set a minimum interest rate of 6.00%, with interest paid semi-annually.
Air New Zealand has an investment grade credit rating, is 53% owned by the New Zealand Government and has over $2.1b in current liquidity.
AIR will be paying the transactions costs for this offer. Accordingly, clients will not be charged brokerage.
The Air Bond is expected to be heavily over-subscribed and therefore will be brutally scaled. I guess most think AIR as our only airline would never be allowed to fail and the govt is the majority owner and so given the rate it's pretty attractive for people but would or could an AIR bond ever be allowed to default?
The 6% interest rate and there being no brokerage costs are positives but buying unsecured and unsubordinated bonds in an airline when we're probably going into a (possibly severe) recession is for the brave IMO.
I would say after this mornings inflation numbers, that we'll be in a position to get over 6% from arguably safer sources quite soon.
The $100 mln Air NZ retail bond offer has closed and the interest rate has been set at 6.61% per annum. This reflects an issue margin of 1.50% per annum over the base rate of 5.11% per annum. That is far above the indications set when this unsecured, unsubordinated, five year bond was launched on Monday. Then it seemed they would be paying 6.25%. They have been caught in an interest rate updraft since.
Auckland Airport seems to be the next in line to offer a bond
Auckland International Airport (AIA) has announced that it plans to issue a 5.5-year senior bond.
The interest rate has not yet been fixed, but based on comparable market interest rates, we are expecting a rate around 5.90%, with interest paid semi-annually.
Auckland Airport is New Zealand's largest commercial airport, with over 2/3 of all domestic sectors. It also owns 1,500 hectares of freehold land and produced an after-tax profit of $191m for the past financial year.
AIA has a strong, stable credit rating of A-.
Please note that AIA will not be paying the transactions costs for this offer and it's 10K min.
I quite like this one. 5.9% for an A- bond for five and a half years looks OK to me.
Quote from: kiwi2007 on Oct 25, 2022, 09:21 PMAuckland International Airport (AIA) has announced that it plans to issue a 5.5-year senior bond.
The interest rate has not yet been fixed, but based on comparable market interest rates, we are expecting a rate around 5.90%, with interest paid semi-annually.
Auckland Airport is New Zealand's largest commercial airport, with over 2/3 of all domestic sectors. It also owns 1,500 hectares of freehold land and produced an after-tax profit of $191m for the past financial year.
AIA has a strong, stable credit rating of A-.
Please note that AIA will not be paying the transactions costs for this offer and it's 10K min.
I quite like this one. 5.9% for an A- bond for five and a half years looks OK to me.
Only 1.5% over the risk free. What premium did AIA have to pay in the past?
Also whats the TC out of interest. Sorry lazy :p
Quote from: kiwi2007 on Oct 25, 2022, 09:21 PMAuckland International Airport (AIA) has announced that it plans to issue a 5.5-year senior bond.
The interest rate has not yet been fixed, but based on comparable market interest rates, we are expecting a rate around 5.90%, with interest paid semi-annually.
Auckland Airport is New Zealand's largest commercial airport, with over 2/3 of all domestic sectors. It also owns 1,500 hectares of freehold land and produced an after-tax profit of $191m for the past financial year.
AIA has a strong, stable credit rating of A-.
Please note that AIA will not be paying the transactions costs for this offer and it's 10K min.
I quite like this one. 5.9% for an A- bond for five and a half years looks OK to me.
I guess buying bonds at the moment is pure speculation on dropping inflation. If inflation drops come next year and stays down, than yes, 5.9% look really good.
If inflation however stays where it is or accelerates, then even 5.9% means we are overall losing money and still paying taxes on our loss (adding insult to injury ...).
Just saying. Still wondering how the people feel who bought some years ago 0% (or even negative interest) bonds with 30 years maturity expecting a really long deflationary period. Just shows that it is impossible to predict future interest rates and inflation.
Discl: I did buy recently some bonds in the 5.5. to 6% bracket (basically my mid term cash allocation), but try at this stage not to move too much money into them.
Auckland Airport have set the interest rate at 5.67% and have applied scaling to the bonds.
SBS Bank are offering 5% for a 12 month term investment now.
Quote from: Glenorchy on Oct 27, 2022, 10:49 PMSBS Bank are offering 5% for a 12 month term investment now.
A look at how all the banks are responding - David Chaston seems to suggest that others will follow with 5% offerings.
https://www.interest.co.nz/personal-finance/118185/5-offer-one-year-term-deposit-has-burst-scene-savers-potentially-ending
A 5% offer for a one year term deposit has burst on to the scene for savers, potentially up-ending the current rate cards of other banks. But despite this, TD rates have been rising anyway, and compared to home loan rates, aren't much out of line
[UPDATED]
27th Oct 22, 11:57am by David Chaston
5% is a big change from a year ago when you struggled to get 2%.
ASB Bank (ASB) has announced that it plans to issue a new four-year senior note.
The four-year interest rate has not been announced, but based on comparable market rates, we are expecting an interest rate above 5.50%.
These notes have a strong credit rating of AA-.
ASB will not be paying the transactions costs for this offer. Accordingly, clients will be charged brokerage.
The ASB four year senior note has been set at 5.928. The rate used to set the interest rate has been on the rise. They accepted 550,000,000 of over-subscriptions so it was popular.
Next up will be BNZ who are meant to be bringing a 6 yr bond offer to market shortly
Does anyone hold IFTHA Infratil Perpetuals? Re-rated to 6.45% with a discount to face value currently around 73.5c for a yield of 8.7%. I'm new to this instrument and wonder if there are any thoughts on whether this is fair value?
Chris Lee on bonds:
Expects a continued flow of retail bond issues and that in 2023 bond issues in New Zealand will be plentiful. Warns that each issuer should be checked carefully.
https://www.ft.com/content/b087cf89-9b1e-4728-aacb-05bc2b821a70
....... We might never see the likes of it again, but we think 2023 might be the year where owning bonds becomes cool again. Pimco's Dan Ivascyn certainly thinks so. Here's an internal Q&A he did today.
....Value has returned to the fixed income markets. Just thinking about nominal yields, we'll start here in the United States, across the yield curve now, you could lock in a very high quality bond yield today. You could look for very high quality spread product, and very, very easily put together a portfolio up in the 6, 6 and a half, percent type yield range, without taking a lot of exposure to economically sensitivity assets.
Much better than cash, but also pretty good versus equities. So, those that have been in cash, looking for incremental return, fixed income's looking quite attractive. So we do think it should be a call to action, these higher yield levels.
On the flip side, if you're concerned about inflation, you can look at various inflation-protected securities, and generate an inflation-adjusted return, or real yield, of greater than one and a half percent, even in some cases close to 2 percent.
In fact, we haven't been back to those real yield levels since, really, the years leading up to the global financial crisis.
Obviously, bond house Pimco is congenitally inclined to think that bonds look attractive......
A pretty positive note on bonds from Harbour management as part of their 'Top 10 risks and opportunities for 2023'.
https://www.interest.co.nz/bonds/118909/harbour-asset-managements-hamish-pepper-chris-di-leva-look-top-10-risks-and
"..We think that with central banks well into their tightening process, supply side inflation moderating, and demand softening, a backdrop is created for stronger bond returns compared to recent years. Importantly, bonds are now at yield levels where they have plenty of room to rally if a non-inflationary macroeconomic shock were to occur..."
From Chris Lee:
China Construction Bank (NZ) Limited has announced that it is making an offer of 3-year floating rate notes.
The interest rate is variable and will be adjusted each three months. The rate for the first three months will be around 5.80 – 5.90% and will increase if rates go higher and decrease if rates fall.
This investment suits investors who are concerned about inflation and want to protect themselves if rates rise further.
These notes have a strong credit rating of A.
CCB will not be paying the transactions costs for this offer. Accordingly, clients will be charged brokerage.
Nothing on Chris Lee site???
The CCB offer has already been allocated and contract notes issued by Chris Lee.
ok, must have been reserved for his so called "sophisticated investor" clients
Quote from: Herbert240 on Feb 03, 2023, 10:56 PMok, must have been reserved for his so called "sophisticated investor" clients
I'd imagine that if you're going to buy the bonds through them they'd open you an account.
anyway:
ANZ Bank (ANZ) has announced that it plans to issue a new senior bond maturing in 5 years' time.
The interest rate has not been announced, but based on comparable market rates, we are expecting an interest rate around 5.10 – 5.30%.
ANZ will not be paying the transactions costs for this offer. Accordingly, clients will be charged brokerage.
and:
Wellington International Airport
WIAL has announced that it is considering issuing a 5.5-year senior bond. More details will be released next week, however we are expecting the bonds to have an interest rate of around 5.25%.
These notes have a strong credit rating of AA-.
Quote from: Herbert240 on Feb 03, 2023, 10:56 PMok, must have been reserved for his so called "sophisticated investor" clients
Its easy, just contact them and open an account.
Details of the Wellington Airport Offer:
Wellington International Airport (WIA) has announced that it plans to issue a new senior bond maturing in 5.5 years' time.
A minimum interest rate has been set at 5.60% and the bonds have a minimum investment size of 10,000 bonds.
These bonds have been issued with an investment grade credit rating of BBB.
WIA will not be paying the transactions costs for this offer. Accordingly, clients will be charged brokerage.
We have uploaded the term sheet and presentation to our website below:
https://www.chrislee.co.nz/uploads//currentinvestments/WIA090.pdf
Opinion The Long View
The asset class du jour: corporate bonds
Higher yields have boosted the popularity of bets on the debt of companies
https://www.ft.com/content/008e02cb-c4a5-4e0d-b2fc-86b533fcab35
Taking Stock 16 February 2023
THE ANZ's recent bond offer was hugely oversubscribed, resulting in 50% scaling for investors.
This suggests either that it was mis-priced (the 5.22% rate too generous), or it suggests there is a huge amount of investor money looking for long, strong bonds, urgency created by a fear that interest rates have peaked.
I have no such fear.
Until inflation shrinks to whatever the new, acceptable level might be, short-term rates will rise.
Long bonds already enjoy a ''negative yield curve'', meaning long-term rates are lower than short-term rates.
It is hard to see how that yield curve can become even steeper. A much steeper negative yield curve would signal a grim year or two ahead.
I suspect the ANZ has been smart in scooping up $500 million. The 5.22% rate might soon look cheap.
This week Wellington International Airport is issuing a 5 ½ year bond with a minimum rate of 5.6%.
I expect many more issues from the private sector, especially from corporates which prefer to step away from the strictest covenants demanded by banks when they grant long-term loans. I suspect the Ryman rights issue of discounted shares has its origin in the high cost of debt.
These interest rate increases cannot be good for those home owners who must renegotiate their mortgage rates in coming weeks.
It would be a brave optimist that assumed that NZ had already discovered how great the fall might be in household discretionary spending.
Credit card borrowing is still increasing.
How much of that increase in expensive debt is simply a reaction to the greater cost of mortgage debt servicing, and to the reality of inflation of essential goods?
(If you want to attract a laughing response, then pretend that inflation for households is only 6%!)
Summerset (SUM) has announced that it plans to issue a new 6-year senior bond and expects to release full details of the bond offer next week.
The initial interest rate has not been announced, but based on comparable market rates, we are expecting an interest rate of approximately 5.80 - 6.00%.
At this stage it is unknown whether SUM will be paying the transactions costs for this offer.
The bonds will be listed on the NZX.
Summerset (SUM) has now announced that its new 6-year Senior, Secured Bond will have a minimum interest rate of 6.45%
SUM have also confirmed that it will be paying the transactions costs for this offer. Accordingly, clients will not be charged brokerage.
https://www.ft.com/content/b287997b-a048-426c-bab3-9a6a97486c17
The record-breaking global bond market rally since the start of this year has fizzled out as mounting signs of persistent inflation force investors to reverse their views on the likely future path of interest rate rises......
.......
Some big investors say the recent sell-off is a sign that it is too soon to pile into bonds; that moment is likely to come later in the year.
"Of course the Fed will at some point cut rates, but the market was trying to pre-empt that . . . and it was so, so premature," said Sonal Desai, chief investment officer of Franklin Templeton. "I still think it is a very good year for fixed income. I just don't think we're there yet."
New Issues
Kiwi Property Group Limited
6.5-year fixed-rate senior secured green bonds. An interest rate above 6.50%p.a. is expected for the BBB+ rated issue.
Heartland Bank unsecured subordinated notes
Heartland Bank Limited is considering making an offer of up to $125 million of unsecured subordinated notes.
It is expected that full details of the offer will be released in mid-March 2023 and an interest rate in the vicinity of 7.00%p.a. is possible.
Kiwi Property has set its $125m six-and-a-half-year green bond at an interest rate of 6.24% following the bookbuild.
Contact (CEN) has announced that it is considering an offer of 6-year fixed rate, senior green bonds. It is likely that these bonds will have an interest rate above 5.70% per annum.
Christchurch City Holdings (CCHL)
CCHL maybe offering 5-year unsecured, unsubordinated, fixed rate bonds to both retail investors and institutional investors. AA rated.
Heartland Bank Limited (HBL) has announced that it is considering an offer of subordinated notes.
The notes are expected to have a 10-year maturity date but may be repaid after 5 years if certain conditions are met.
At this stage the interest rate has not been set but based on comparable market information it is likely to offer around 7.00% fixed for the first 5 years (with interest paid quarterly). After 5 years the interest rate will be reset to a new interest rate (unless the Notes are repaid on this date).
Best site for monitoring bond prices.
https://www.interest.co.nz/bonds-data/issues
NZDX is better and gives real data on bid and ask yields and trades.
For example, that site above lists ARV 010 bonds as 6.9% yield to maturity but they traded a whopping 6 million+ at 7.27% on Friday, more than 5% of the entire bond issue traded in one day! I think a big institutional seller sold out their entire holding.
https://www.directbroking.co.nz/directtrade/dynamic/fixedinterest.aspx
The Heartland issue worries me in terms of plain English, where do the bonds stand if there's a banking crisis? (Not a completely implausible possibility in my opinion). From what I have read Heartland themselves do not guarantee the bonds. I stopped reading after that because that's all I really needed to read.
Quote from: Basil on Apr 16, 2023, 11:20 AMNZDX is better and gives real data on bid and ask yields and trades.
For example, that site above lists ARV 010 bonds as 6.9% yield to maturity but they traded a whopping 6 million+ at 7.27% on Friday, more than 5% of the entire bond issue traded in one day! I think a big institutional seller sold out their entire holding.
https://www.directbroking.co.nz/directtrade/dynamic/fixedinterest.aspx
The Heartland issue worries me in terms of plain English, where do the bonds stand if there's a banking crisis? (Not a completely implausible possibility in my opinion). From what I have read Heartland themselves do not guarantee the bonds. I stopped reading after that because that's all I really needed to read.
Of the three I think your link to direct broking is the best. Thanks I didn't know about that.
Heartland Bank Limited (HBL) subordinated $100m subordinated note offer (including $25m over-subscriptions) will pay 7.51% for first 5 years.
This Heartland Bond was not popular at all. I think it's the first time in a while that I've seen an offer where the full potential over-subscri[ption amount is not taken up - in this case they allowed for 50m over-subscriptions but have only had takers for 25m. There was no scaling on this. I guess there's a message in that.
Kiwibank Bank – Subordinated Notes
Kiwibank Limited (KWB) has announced that it is considering an offer of subordinated notes.
The notes will have a 10-year maturity date but may be repaid after 5 years if certain conditions are met.
At this stage the interest rate has not been set but based on comparable market information it is likely to offer around 6.50% fixed for the first 5 years (with interest paid quarterly). After 5 years the interest rate will be reset to a new interest rate (unless the Notes are repaid on this date).
https://www.chrislee.co.nz/uploads//currentinvestments/KWB1T2.pdf
The notes are expected to be listed on the NZX, enhancing liquidity.
KWB has confirmed that it will be paying the transaction costs
KiwiBank subordinated note will have a rate fixed of around 6.40% - 6.60% for the first five years.
Quote from: kiwi2007 on May 04, 2023, 11:17 AMKiwiBank subordinated note will have a rate fixed of around 6.40% - 6.60% for the first five years.
Set at the lower end.
6.40% per annum until 12 May 2028, and then reset to a new fixed rate until the Notes are repaid.
Interest Payment Dates: Interest is scheduled to be paid quarterly in arrear on
12 February, 12 May, 12 August and 12 November during the Term, and the Maturity Date
Looks like the margin rate will be 2.20% on reset.
BNZ announced it's considering a BBB rated perpetual bond with an interest rate around 7%. BNZ to pay transaction costs.
And another bond on it's way:
This time it's a Mercury 5 year Green Bond paying circa 5.5% and rated BBB+
Quote from: kiwi2007 on May 23, 2023, 08:46 PMBNZ announced it's considering a BBB rated perpetual bond with an interest rate around 7%. BNZ to pay transaction costs.
QUOTATION NOTICE: NZX DEBT MARKET BANK OF NEW ZEALAND ("BNZHA") PERPETUAL PREFERENCE SHARES
Company: Bank of New Zealand ("BNZ")
Security Code: BNZHA
ISIN: NZBNZEP001C9
Details of Issue: NZ$375,000,000 of perpetual preference shares ("PPS").
Offer Opening Date: Monday, 29 May 2023
Offer Closing Date: 12:00pm on Friday, 2 June 2023
Maturity Date: Not applicable
Rate Reset Date: 4 June 2029 and each quarterly Schedule Distribution Payment Date after that date
Distribution Rate: 7.30% per annum until 14 June 2029. After this date, the distribution rate will be a floating rate.
Distribution Payment Dates: 14 March, 14 June, 14 September and 14 December in each year and, if the PPS are redeemed, the date on which the PPS are redeemed.
Doesn't appear to be any scaling on the BNZHA above. Contract notes are out and, for those that missed it, or want more Chris Lee has a few left on a first come, first served basis.
Edit: Reset rate after 6 years will be 3% on top of the 3 month bank bill rate.
From Chris Lee
Genesis Energy - new subordinated capital green bond, with further details to be announced next week.
Interest rate around 6.50% - maturity date of 30 years - election process after 5 year enabling investors the chance to be repaid early if the election process is successful.
Genesis Genesis covering transaction charges.
I see FCGHA is getting called..
Genesis Energy Limited (GNE) has announced a new capital bond.
A minimum interest rate of 6.50%p.a.
Maybe better buying the shares for income?
Quote from: Glenorchy on Apr 24, 2023, 12:01 PMThis Heartland Bond was not popular at all. I think it's the first time in a while that I've seen an offer where the full potential over-subscri[ption amount is not taken up - in this case they allowed for 50m over-subscriptions but have only had takers for 25m. There was no scaling on this. I guess there's a message in that.
And yet they come highly recommended by Chris Lee, Heartland is well managed - Fitch has them rated BB+ ?
Welcome to the forum Davexl, its good to have you on board.
My understanding is the structure of the new Heartland bond is its ranks behind everything except shareholders' funds. Not 100% sure but I think the security interest is lower than the other bond Heartland have (HBL020 last traded at 6.9%).
Regional banks have come under a lot of pressure in the US, bank index down 30% in the first half.
Heartland's official credit rating suggests a 1 in 30 year chance of a default event in the next 5 years.
My read on that is with the recent stress on smaller banks here there's a 1 in 30 chance of a default event in the next year, not 5 years as if there's a default through a funding shortfall its probably going to happen in the next year.
As I see it you'd really want a 3.3% yield premium to other quality commercial paper.
HBLIT2 last traded at 8.02%.
Lot of good quality lower risk corporate bonds that I prefer trading in the mid 7% range.
For example, one I hold is ARV010 last traded 7.57%. The gearing is the lowest in the sector at about 30% and those bonds rank equally under a security trust deed with bank debt.
Heck even Mercury bonds 2027 maturity, MCY050 traded at 7.11% on Friday. Extremely unlikely a power company their size is going out of business anytime soon. I think you can "bank" on that !
Quote from: Davexl on Jul 08, 2023, 05:23 PMAnd yet they come highly recommended by Chris Lee, Heartland is well managed - Fitch has them rated BB+ ?
FWIW I try to keep the "average credit rating" of the bond portfolio at A or better.
So I wouldn't touch anything with a rating below BBB+. Heartland may be profitable, Heartland may be well managed, but you're buying the
bond and it's covenants not the
company itself.
Quote from: Henry Filth on Jul 09, 2023, 08:23 AMFWIW I try to keep the "average credit rating" of the bond portfolio at A or better.
So I wouldn't touch anything with a rating below BBB+. Heartland may be profitable, Heartland may be well managed, but you're buying the bond and it's covenants not the company itself.
Thanks very much for that Henry. Reminds me of what my Dad used to say about investment grade or above!
David
Quote from: Basil on Jul 08, 2023, 05:57 PMWelcome to the forum Davexl, its good to have you on board.
My understanding is the structure of the new Heartland bond is its ranks behind everything except shareholders' funds. Not 100% sure but I think the security interest is lower than the other bond Heartland have (HBL020 last traded at 6.9%).
Regional banks have come under a lot of pressure in the US, bank index down 30% in the first half.
Heartland's official credit rating suggests a 1 in 30 year chance of a default event in the next 5 years.
My read on that is with the recent stress on smaller banks here there's a 1 in 30 chance of a default event in the next year, not 5 years as if there's a default through a funding shortfall its probably going to happen in the next year.
As I see it you'd really want a 3.3% yield premium to other quality commercial paper.
HBLIT2 last traded at 8.02%.
Lot of good quality lower risk corporate bonds that I prefer trading in the mid 7% range.
For example, one I hold is ARV010 last traded 7.57%. The gearing is the lowest in the sector at about 30% and those bonds rank equally under a security trust deed with bank debt.
Heck even Mercury bonds 2027 maturity, MCY050 traded at 7.11% on Friday. Extremely unlikely a power company their size is going out of business anytime soon. I think you can "bank" on that !
Thanks again for the good steering 'Basil'
Infratil new 6-year senior bond issue next week - around 7% pa.
Infratil 6 year issued @ 6.9%
And the bond wagon keeps on rolling:
Westpac Bank are about to offer a subordinated capital note with interest rate around 6.50%. And with a strong credit rating of A- :)
For the first 5½ years of its recently closed $600 mln unsecured subordinated bond issue, Westpac will pay 6.73% pa.
Aug 4th. Scaled back. I was cut to 70%.
Infratil Bond Offer
The Interest Rate for the 2031 Bonds will be the greater of:
a) the Minimum Interest Rate of 7.05% per annum, and
b) the sum of the Issue Margin and the Base Rate determined on the Rate Set
Date (1 September 2023).
The indicative Issue Margin range for the 2031 Bonds is 2.40% to 2.55% per
annum. The Issue Margin will be set following a bookbuild process on 1
September 2023 and will be announced by Infratil via NZX shortly thereafter,
together with the Interest Rate. In any case the Interest Rate will not be
less than the Minimum Interest Rate of 7.05% per annum.
Dire economic outlook should be positive for bonds: Nikko
The worse the economy is, the more positive it is for investors in fixed interest, and "it's looking pretty dire at the moment," according to Fergus McDonald, head of bonds and currency at Nikko Asset Management.
https://www.goodreturns.co.nz/article/976522211/dire-economic-outlook-should-be-positive-for-bonds-nikko.html
As long as they can pay the bonds back i suppose
Quote from: kiwi2007 on Sep 07, 2023, 09:46 AMDire economic outlook should be positive for bonds: Nikko
The worse the economy is, the more positive it is for investors in fixed interest, and "it's looking pretty dire at the moment," according to Fergus McDonald, head of bonds and currency at Nikko Asset Management.
https://www.goodreturns.co.nz/article/976522211/dire-economic-outlook-should-be-positive-for-bonds-nikko.html
The trick is to sell the bonds at the time when shares are at the bottom and buy shares instead. So, yes, if you feel it still gets worse, than by all means buy bonds. Just make sure you dance close to the exit ... as soon as stocks go up (and they will at some stage), you don't want to lose out with all these bonds in your portfolio ...
Watch Aaron Ibbotson explain his bearish research exclusively on today's episode of Markets with Madison.
https://www.nzherald.co.nz/business/stand-off-why-the-nzx-may-be-next-in-line-for-double-digit-correction/UUZJJWA5AJEVZIG6A6BWFCMZAI/
A 10 per cent drop over the next 12 months was more realistic, he said, although he wasn't forecasting that per se.
For a deeper correction to occur, he said the market would need to re-establish its historical relationship with long-dated bond yields.
"Today, that relationship has pretty much totally broken down."
Channel Infrastructure New Zealand (CHI) has announced that it plans to issue a new 6-year senior bond.
The bonds have a minimum interest rate of 6.75% which will be fixed for the 6-year duration.
CHI will pay the transaction costs for this offer.
I wonder what CHI want the money for? Capex? Expansion? Or rolling over existing debt?
Quote from: Henry Filth on Oct 31, 2023, 07:41 AMI wonder what CHI want the money for? Capex? Expansion? Or rolling over existing debt?
a) repaying a portion of Channel Infrastructure's existing bank debt;
b) redeeming on 1 March 2024 any Subordinated Notes[1] that are not otherwise purchased on the Issue Date under
the Exchange Mechanism[2]; and
c) general corporate purposes.
The Bonds will also provide diversification of funding that aligns with an infrastructure business.
Right, thanks. I'll take that to mean rolling over existing debt plus reducing the owner's equity risk, and avoid
Quote from: Henry Filth on Oct 31, 2023, 05:20 PMRight, thanks. I'll take that to mean rolling over existing debt plus reducing the owner's equity risk, and avoid
They may well have to up the 6.75% offer a bit to get them away. We'll find out next week.
Well, we found out today, 6.75% it is and oversubscribed to boot.
https://www.nzherald.co.nz/business/jarden-wealth-weekly-why-bonds-are-back/VAQ3VQE77NB4FKAWIXLM2THDTQ/
Interesting to compare current bond and bank deposit rates against the average Kiwi saver funds over a 10 year period:
In todays Stuff "Milford was the top performer in the conservative category, with 5.7% a year, balanced category at 8.5% and growth, at 10.1%. Generate was top of the moderate funds, at 5.2% and aggressive funds, at 9%.
The averages for the types of funds, in comparison, were 3.9% a year for conservative funds, 4.3% for moderate funds, 6.1% for balanced funds, 7.6% for growth funds and 8% for aggressive funds."
https://www.stuff.co.nz/business/money/301003281/top-performing-kiwisaver-funds-of-the-last-decade
So a 6 to 7% return seems pretty good (as long as the original sum is returned at the end of the term).
Good article in the FT the other day mainly aimed at the bond market; "You've missed the 5% 10 year, don't miss the 4.5%.."
Probably some relevance here.
Chris Lee pretty positive on bonds too btw.
https://www.ft.com/content/3b925ab5-9e67-4d28-a7f1-e078d5434d15
"We're not going to see 5 per cent on the US 10-year again," said Karen Ward, chief market strategist for Europe at JPMorgan Asset Management. "If you missed 5, don't miss 4.5. Bonds are very high on the Christmas wishlist in my house.".....
"..
"Soft landings are a bit like unicorns. They don't exist," said Mike Riddell, UK fixed income manager at Allianz Global Investors, who is clearly in the latter camp. He sees an "extremely high risk of a recession".
"We adore government bonds," he said. "We're as full as we can be on government bonds and we're outright short on credit where mandates allow."
..."
Quote from: kiwi2007 on Dec 06, 2023, 08:50 PMGood article in the FT the other day mainly aimed at the bond market; "You've missed the 5% 10 year, don't miss the 4.5%.."
Probably some relevance here.
Chris Lee pretty positive on bonds too btw.
https://www.ft.com/content/3b925ab5-9e67-4d28-a7f1-e078d5434d15
"We're not going to see 5 per cent on the US 10-year again," said Karen Ward, chief market strategist for Europe at JPMorgan Asset Management. "If you missed 5, don't miss 4.5. Bonds are very high on the Christmas wishlist in my house.".....
"..
"Soft landings are a bit like unicorns. They don't exist," said Mike Riddell, UK fixed income manager at Allianz Global Investors, who is clearly in the latter camp. He sees an "extremely high risk of a recession".
"We adore government bonds," he said. "We're as full as we can be on government bonds and we're outright short on credit where mandates allow."
..."
I can see why Mike Riddell can see a recession for a country which has been vandalized for 12 plus years by a bunch of absolutly incompetent tories looking only after their private wealth.
Question is just - why would we assume that the British disease will impact the rest of the world as well?, I guess - they are neither the US nor China. They managed to drop their economy from #5 down to #6 in the world (or is it already #7? - France was already snatching their heels last time - hard to keep track). The times when Britain ruled the waves are now a long time ago. Thats what trusting in vicious liars does to your economy.
For the rest of the world I'd say the chances for a nice recovery in 2024 are pretty good - unless one (or more) of the wars gets out of control.
" "We're not going to see 5 per cent on the US 10-year again," said Karen Ward, chief market strategist for Europe at JPMorgan Asset Management. "If you missed 5, don't miss 4.5. ..."
So far the lady's right.
US Treasury yields sank after projections from the Federal Reserve showed a dovish tilt among members of its rate-setting committee.
Ten-year yields fell to 4.07 per cent, the lowest since September 1.
Black Peter.. Agree regarding the Tories but the article was more about bond yields in general (led by the US) rather than the UK in particular.
......."Investors expect bonds to outperform equities in 2024......."
1. A much better backdrop for bond returns (redux)
If this headline looks familiar, then it should. It featured in last year's piece. Back then we had the view that 2023 should be a better year for bond returns owing to higher running yields, inflation moderating and demand softening. While bonds have delivered positive returns this year, with the Bloomberg NZBond Composite 0 year+ Index up almost 5% and the Bloomberg Global Aggregate NZD Hedged Index up around 3% to the end of November, we think the story has much further to run in 2024, particularly in New Zealand where we are seeing signs of monetary policy working and ample room for further pricing in of rate cuts. Globally the driver could be a move away from the consensus "soft landing" narrative that is currently persisting. One thing we believe is the attractiveness of running yields of 5.1% for the Bloomberg NZBond Composite 0 year+ Index and 5.2% for the Bloomberg Global Aggregate NZD Hedged Index. Importantly, bonds are at yield levels where they have plenty of room to rally if a non-inflationary macroeconomic shock were to occur.
The large pipeline of bond issuance, however, may cause some volatility. In New Zealand, the Government needs to raise almost NZ$40bn in 2024 via the bond market, more than four times the pre-COVID annual average. In the US, the independent US Congressional Budget Office forecasts the US Government to run increasingly large fiscal deficits for the next decade, taking debt to 120% of GDP, from 100% currently. Increasing net interest outlays are a key contributor, along with larger-than-sustainable primary deficits. The worrying thing for markets is that this outlook for US fiscal deterioration sits in the context of below-average term premia and quantitative tightening from global central banks. As such, many analysts don't think these challenging dynamics are fully reflected in current yields........."
https://www.interest.co.nz/investing/125820/harbour-asset-managements-hamish-pepper-and-chris-di-leva-look-ahead-2024-keeping
It's been a quiet couple of months but companies are about to start issuing new bonds. Here's the first;
SBS Bank has announced plans to issue a new subordinated bond, with further details to be announced next week. While the interest rate is not yet known, based on current market conditions, we expect it to offer above 6.50% per annum.
The bonds will have a set maturity date of 10.5 years; however, SBS Bank will have the option of repaying these bonds under certain conditions after 5.5 years.
SBS will cover the transaction costs for this offer.
The SBS Bond offer closes on the 15th and it's estimated to be offering in the region of 7% as swap rates have moved up a little. It's subordinated so I am in 2 minds about it but then my Heartland subordinated "junk" bonds have performed well so far so I might give this a nibble but then I was able to get 7.08% for senior unsubordinated infratil bonds recently so perhaps I should be patient as something better may come along.
Quote from: kiwi2007 on Jan 30, 2024, 06:07 PMIt's been a quiet couple of months but companies are about to start issuing new bonds. Here's the first;
SBS Bank has announced plans to issue a new subordinated bond, with further details to be announced next week. While the interest rate is not yet known, based on current market conditions, we expect it to offer above 6.50% per annum.
The bonds will have a set maturity date of 10.5 years; however, SBS Bank will have the option of repaying these bonds under certain conditions after 5.5 years.
SBS will cover the transaction costs for this offer.
Would this be a reasonable offer? You are subordinated to the redeemable shares so I assume you would get nothing in a liquidation. I suppose you need to have faith in their loan book. Also if interest rates fall they can buy back the bonds so you will be reinvesting in a low interest rate environment. If interest rates climb you are in for 10.5yrs. These are supposed to be questions rather than statements but I have read something that came up as an offer document. 7% I guess there are not a lot of places to get 7% atm. Where do you find up coming bond offers?
Quote from: Apollo on Feb 09, 2024, 01:51 PMWhere do you find up coming bond offers?
Under announcements on the NZDX.
Speaking of which here is one they posted today
Wellington International Airport (WIA) has announced that it plans to issue a new senior bond maturing in 6.5 years' time.
The initial interest rate has not been announced but based on its credit rating of BBB, it will probably be in the 5.75% - 6.00% range.
It is anticipated that WIA will not cover the transaction costs associated with this offer. This will be confirmed once the offer docs are out.
SBS Bank's subordinated bond offer had its margin range announced today of between 3.0% and 3.2%. And they said the interest rate for the first five and a half years until the First Optional Redemption Date will be no less than the minimum interest rate of 7.35% pa.
SBS ended up at 7.62% as swaps have rallied.
WIA has released it's indicative term sheet today, the interest rate is a minimum of 5.8% - it's here term sheet (http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/WIA/426455/412907.pdf)
Summerset have announced Summerset Group Holdings Limited (Summerset) is considering making an offer of up to NZ$75 million (with the ability to accept up to an additional NZ$50 million of oversubscriptions at Summerset's discretion) of six year, fixed rate bonds to New Zealand investors. The bonds will be unsubordinated obligations of Summerset, and will have the benefit of a guarantee and security package provided by the Summerset guaranteeing group.
It is expected that full details of the offer will be released in the week beginning 26 February 2024, when the offer is scheduled to open. Interest Rate probably in the 6 - 6.5% range
Wellington International Airport interest rate was set at 6.02
Summerset new bond Sum050 had it's interest rate set at 6.43
Next up their is a bond offer coming from Spark Finance
ANZ Perpetual Preference Share (PPS) bonds. Min rate 7.5% and they'll pay brokerage.
Quote from: kiwi2007 on Mar 04, 2024, 02:06 PMANZ Perpetual Preference Share (PPS) bonds. Min rate 7.5% and they'll pay brokerage.
And you get imputation credits too? Is that correct?
Rate set at 7.6%
Meridian Energy Limited (Meridian) confirmed it is making an offer of up to $200 million (with the ability to accept oversubscriptions of up to an additional $100 million) of 6-year fixed rate senior green bonds. Indicative around 5.30%.
Quote from: kiwi2007 on Mar 08, 2024, 09:55 PMAnd you get imputation credits too? Is that correct?
Yes pretty sure they're fully imputed based on the PDS. Got a small allocation of these as I aready hold ordinary shares so constrained by my approach to diversification.
Auckland Airport Senior Bond Offer
Auckland Airport (AIA) has announced that it plans to issue a new 6.5-year Senior Bond.
The interest rate has not been set but will likely be in the vicinity of 5.50% with a minimum investment size of $10,000.
AIA has a strong credit rating of A-.
AIA will not be paying the transaction costs for this offer.
Infratil just sent this out:
Infratil Considers Infrastructure Bond Offer
Infratil Limited (Infratil) is considering making an offer of 7½ year unsecured, unsubordinated, fixed rate infrastructure bonds maturing on 17 December 2031 (New Bonds) to New Zealand investors.
The offer will likely comprise two separate parts:
A "Firm Offer" expected to open on 27 May 2024, which will be reserved for New Zealand clients of the Joint Lead Managers, approved financial intermediaries and other primary market participants invited to participate in the bookbuild. The Firm Offer is expected to close at 11.00am on 30 May 2024.
An "Exchange Offer" expected to open on 31 May 2024 (following the Firm Offer), under which all New Zealand resident holders of the IFT230 bonds that mature on 15 June 2024 (2024 Bonds) will have the opportunity to exchange some or all of their maturing 2024 Bonds for New Bonds. The Exchange Offer is expected to close at 5.00pm on 12 June 2024.
Investors can register their interest in the offer by contacting a Joint Lead Manager or their usual financial adviser. Indications of interest will not constitute an obligation or commitment of any kind.
The IFT350 7.5 year infrastructure bond had the interest rate set at 7.06 - the exchange is still in process so these will list next week.
With Canada cutting rates and the ECB cutting rates 25 bp overnight. I wonder how long it will be before RBNZ follows.
The ANZ is forecasting we get our first cut next Feb. The RBNZ previously indicated Aug 2025 but if the Fed goes sooner i.e Sept then could NZ cut this year - Oct/Nov? Certainly signs of the economy weakening are everywhere.
Mercury are going to be offering capital bonds. Interest rate is expected to be above 6%
The bonds will have a set 30 year maturity date but with an election date after 5 or 6 years and they're widely expected to repay on the election date.
Those of use buying bonds over the last 18 months should be happy with the decline in swap rates today :)
Interestingly I was watching Jim Cramer the other day on CNBC and he talked all about age-appropriate investing in relation to portfolio construction pertaining to bonds. In your in your 60's he reckoned 50% of your listed net worth should be in bonds, rising to 60% in your 70's and 70% in your 80's.
I was a bit surprised it was that high, thought more like the classic 60/40 portfolio, (60% shares, 40% bonds) would be most appropriate in your 60's. Wonder if some of that 50% shouldn't be in quasi bonds like REITS and Gentailier shares? Anyway, for what its worth, I just thought I'd mention it.
Quote from: Basil on Jul 10, 2024, 06:09 PMInterestingly I was watching Jim Cramer the other day on CNBC and he talked all about age-appropriate investing in relation to portfolio construction pertaining to bonds. In your in your 60's he reckoned 50% of your listed net worth should be in bonds, rising to 60% in your 70's and 70% in your 80's.
I was a bit surprised it was that high, thought more like the classic 60/40 portfolio, (60% shares, 40% bonds) would be most appropriate in your 60's. Wonder if some of that 50% shouldn't be in quasi bonds like REITS and Gentailier shares? Anyway, for what its worth, I just thought I'd mention it.
Always a bit sceptical if people create formulas which should be true for everybody of certain age group. Generalisations are sometimes useful, but always wrong :) ;
My strategy is to have enough cash / bonds to get through the next bear market (whenever it comes) - and this strategy has not changed since I started investing.
Obviously - somebody with a work income can tolerate a higher risk exposure, but for anybody retired, I don't see why they would need a higher ratio of bonds when they grow older?
Chris Lee:
Recent bond issues have traded at a premium upon listing, continuing a trend seen this year. All new bond issues in 2024 are currently trading at premiums, offering lower yields than the coupon rates.
We have been told many times over the last year that central banks are expected to cut rates. Although this has not come to pass yet, I warn investors that interest rates for new issues in the months ahead might be lower than comparable issues released earlier in the year.
To expect higher interest rates for comparable fixed interest investments than earlier in the year is looking unrealistic.
Underlying rates, such as swap rates, which are added to a margin in the calculation of interest rates for new issues, have slid significantly of late. Expectations of further easing appear to be influencing what returns investors, anticipating lower interest rates, will accept.
Mercury Energy recently issued bonds (MCY070) which included a margin of 2.0% and a 5-year swap rate of 4.42% resulting in an interest rate of 6.42% for the first 5 years of the bondswhen the offer closed on 27 June.
Swap rates have slipped to 4.20% since the rate for the bonds was set and the first day of trading in MCY070 bonds on Friday 12 July saw the bonds trade at a yield as low as 5.88% (pricing the bonds at approximately $10,230 per 10,000).
The one-year swap rate, which is more susceptible to OCR policy, as part of short-term interest rate expectations, has fallen to a hair above 5.0%, a level not seen in 18 months. All NZ swap rates are below 2023 peaks. For context, the one-year swap rate reached a high of 6.04% in May 2023 with all other swap rate durations peaking in October/November 2023.
Many depositors will have noticed that major banks' term deposit rates have fallen. I expect these rates will continue to fall, particularly for shorter terms, as we move closer to the RBNZ cutting the OCR.
An OCR cut should not indicate that interest rates will fall off a cliff but rather that they might soften.
Quote from: Basil on Jul 10, 2024, 06:09 PMInterestingly I was watching Jim Cramer the other day on CNBC and he talked all about age-appropriate investing in relation to portfolio construction pertaining to bonds. In your in your 60's he reckoned 50% of your listed net worth should be in bonds, rising to 60% in your 70's and 70% in your 80's.
I was a bit surprised it was that high, thought more like the classic 60/40 portfolio, (60% shares, 40% bonds) would be most appropriate in your 60's. Wonder if some of that 50% shouldn't be in quasi bonds like REITS and Gentailier shares? Anyway, for what its worth, I just thought I'd mention it.
Was the go to formulae for many, many years but these days, with people living much longer, late 70's rather than 60's may be more 'appropriate'. (Not really a figure for individual active investors but plenty of funds seem to aim that way ).
The 100-minus-your-age rule should now be closer to 120 minus your age..
Bank of New Zealand (BNZ) has announced that it is considering making an offer of perpetual preference shares (PPS).
The PPS are expected to constitute Additional Tier 1 Capital for BNZ's regulatory capital requirements and to have a credit rating of BBB.
This investment is perpetual, with a likely redemption date in six years' time.
The initial six-year distribution rate has not been announced, but based on comparable market rates, we are expecting a rate of around 7.00% per annum.
BNZ will be paying the transaction costs on this offer.
Those BNZ PPS look pretty attractive considering where we are in the rate cycle.
Quote from: Glenorchy on Jul 22, 2024, 07:36 PMThose BNZ PPS look pretty attractive considering where we are in the rate cycle.
I see they're now saying nearer 6.9% rather than 7% - unsurprising really as yields on existing bonds have fallen markedly recently.
Just announced the rate set for the BNZ PPS is 7.28%
https://www.ft.com/content/076c1d75-a1dc-4c40-99fb-70bc061b5aa3
Investors are piling back into bonds as recession replaces inflation as markets' main fear, and fixed income proves its worth as a hedge against the recent stock market chaos......
...... "I think bonds are back," Bhatia said. "But the thing that will support credit at these levels will be the concept that the Fed will react quickly and get the policy rate down" if signs of weakness persist.
Chris Lee - Bond liquidity has fallen, as traders swooped in to acquire any and all available bonds. Even bonds issued as recently as a month ago – like the Mercury 6.42% bond (MCY070) – are now trading at significant premiums. BNZ's recent Perpetual Preference Share issue, priced at 7.28%, lists this Thursday.
Swap rates also plunged to fresh lows, with the five-year swap rate now at its lowest point in two years. This has resulted in many long-term senior bonds now being priced below a 5.00% yield. Investors will need to set their expectations accordingly.
Westpac have announced to the market that they are considering an offer of PPS. Interest rate would likely be in the high 6, low 7% range.
https://www.nzx.com/announcements/436841
The interest rate on the Westpac PPS has been set at 7.1% (margin of 3.5%) they had a huge uptake issuing 375 million.