MONTHLY REVIEW
JULY 2015
JULY’S STRONG RETURN FROM BONDS
KEY STORIES
CONTENTS




All of July’s debt issues
Foster’s $700m debut debt issue
 July bond index performance
How much hybrid yield is enough?
APRA: Banks need more capital
 Westpac hybrid detail
STOP PRESS
As expected the RBA held cash rates steady at 2.00% at its 4 August meeting.
SUMMARY
July saw very strong bond returns driven by events in Greece and China. The semi
government and government bond indices returned 1.47% and 1.42%
respectively. At the beginning of July the Greek debt crisis and subsequent
referendum on austerity saw nervous markets and a freeze on new debt issues.
This was mostly resolved when mid-month, the Chinese sharemarket saw
unprecedented volatility before state-owned authorities stepped in with huge
buying support. This resulted in a strong global ‘safety-first’ move to bonds. As
the dust settled the debt markets began to unfreeze and the latter half of the
month saw strong levels of new debt issues from a range of banks, corporates
and governments. QTC issued $300m of its 2024 bond at around 3.31% and
Foster’s launched a $700m debut bond issue guaranteed by its parent company
SAB Miller. July also saw APRA release a report calling for banks to hold more
capital and Westpac announced a new $750m hybrid issue. The AUD finally
heeded Glenn Stevens’ calls to go lower as it shed US$0.04 cents on the back of
falling commodity prices.
Westpac launches new $750m hybrid
Westpac launched a new hybrid that will pay between 400bps and 420bps above
the 90d BBSW rate or yield of around 6.14% to 6.34% including franking credits.
This is the highest issue margin from a major bank and will be watched closely as
other banks are likely to follows suit. Read more.
Primary producer deposit accounts reach almost $5bn
A special deposit scheme set up for farmers and primary producers has seen
deposits soar over the past 4 or so years. The Farm Management Deposit Scheme
offers tax breaks and bonus interest rates to help farmers smooth out their
earnings over an agricultural cycle. Read More.
Greek debt crisis
The Greek debt crisis is not fully resolved but markets are comfortable that a
pathway has been agreed upon that will see Greece remain in the EU, implement
tax and welfare reforms and begin to repay some of its debts. Read more.
The key issues facing bond markets
BT’s head of income and fixed interest outlines his key points on the bond market
challenges as the major powers try to re-inflate their economies. Read more.
Not For Profit boards need more financial literacy
Pro Bono Australia and Grant Thornton collaborated on a financial literary study
of Not For Profit boards. The results, somewhat predicably, say that NFP boards
need to improve their collective financial literacy and governance as funding
becomes more difficult to source and demands on NFPs increase. Read more.
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COMMENTARY
CASH ACCOUNTS
TERM DEPOSITS
BANK BILLS
GOVT BONDS
SEMI GOVT BONDS
CORPORATE BONDS
HYBRIDS
EXCHANGE TRADED
FUNDS
MANAGED FUNDS
NEW ISSUES
NEWS
INSIGHT
PRICING TABLES
TERM DEPOSITS
GOVT BONDS
SEMI GOVT BONDS
CORPORATE BONDS
FLOATING RATE NOTES
HYBRIDS
AUST BOND FUNDS
GLOBAL BOND FUNDS
EXCHANGE TRADED
FUNDS
CASH FUNDS
SUBSCRIBE HERE TO YIELD REPORT
SNAPSHOT OF PRICES
Month Month Month Month
Close
Chg
High
Low
RBA Cash Rate %
90d Bank Bill %
Aust 3y Bond %*
Aust 10y Bond %*
US 2y Bond %
US 10y Bond %
US 30y Bond %
Aust iTRAXX
$A1 / US cents
2.00
2.14
1.91
2.80
0.67
2.18
2.91
97.1
73.02
0.00
0.00
-0.17
-0.25
0.03
-0.17
-0.21
-1.2
-4.05
2.15
2.15
3.21
0.72
2.45
3.24
106.6
77.39
2.13
1.80
2.71
0.55
2.18
2.91
91.6
72.35
* Implied yields from Sep 2015 futures.
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
-0.40
-0.60
-0.80
-1.00
-1.20
-1.40
-1.60
BLOOMBERG AUSBOND INDICES (%)
Returns by month
Bank Bill
Government
Corporate
Composite
Semi Government
Floating Rate Note
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
14 14 14 14 14 15 15 15 15 15 15
Jul
15
yieldreport.com.au
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MONTHLY REVIEW
JULY 2015
The RBA left rates unchanged at its July meeting and the board was
positive about the labour market and economic conditions
generally. However, markets still continue to factor in a rate cut
somewhere between the end of this year and December next year,
with May/June judged to be the most likely time. Markets during
July also changed their view on how long rates would stay low with
pricing now suggesting the last quarter of 2016 before rate rises are
being factored in. Cash accounts rates were steady except for CBA
that reduced its Netbank Saver rate by 15bps and Westpac that
reduced its eSaver and Reward Saver rates by 25bps and 20bps
respectively. CUA also reduced its eSaver rate by 10bps.
1.95
1.90
1.85
1.80
1.75
1.70
©YieldReport
31-Jul
30-Jun
29-May
SOURCE: IRESS 30 day interbank cash futures.
CASH RATE EXPECTATIONS (%)
2.00
Home Page
Cash Accounts
CASH
Product
Int p.a.
Special Cond
AMP Saver Account
AMP Notice Account
ANZ V2 Plus
ANZ Progress Saver
Bankwest Smarter Esaver
Bankwest Solid Gold Saver
BOQ CMA
BOQ Bonus Interest
CBA NetBank Saver
CBA Goal Saver Account
CUA eSaver Plus Account
Heritage Online Saver
ING Savings Accelerator
Macquarie CMA
MEBank Online Savings
NAB Isaver
NAB Reward Saver
Rams Saver Account
Suncorp eOptions
Usaver
Usaver Ultra
Westpac eSaver
2.60%
2.70%
0.50%
2.71%
3.00%
2.25%
2.15%
2.75%
1.85%
2.90%
3.05%
2.70%
2.75%
1.90%
2.25%
2.00%
3.05%
3.60%
1.90%
2.31%
3.37%
1.75%
Westpac Reward Saver
2.50% dep $50 and no withdrawals
31 days’ notice
1 dep no w/draw mth
Min balance $5,000
Up to $500k.
Zero w/draw pm up to $500k
$10k+
Limit 1 w/draw pm
$250k+
$200pm dep, $100k lim, 1wd pm
$750,000+
$150k+
1 dep no w/draw mth
$200 pm no withdrawal
$200 pm up to $200k
Up to $200k +$2k pm dep
Source: YieldReport
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 16 16
TERM DEPOSITS
Average term deposit rates continued to fall as banks cut lots of
rates by small amounts. Of the big 4 only CBA cut rates in July slicing
10bps off many terms and 15bps of the 1y rate. Bankwest cut
100bps from its 120d rate but increased its 90d rate by 70bps. With
markets factoring in one more rate cut (see chart above) perhaps
the sweet spot in term deposits is the 1y rate where investors can
lock in between 2.90% and 3.10%.
The best rate on offer is 3.50% for a 5y term and at the end of the
month it was being offered by RaboDirect.
The average rates can be seen in the chart on the right and a full
comparison is available on page 21.
AVERAGE TERM DEPOSIT RATES (%)
3.10
2.90
2.70
2.50
July
June
2.30
©YieldReport
2.10
1m
3m
6m
9m
1y
2y
3y
4y
5y
2
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MONTHLY REVIEW
JULY 2015
Home Page
BANK BILLS / SWAP RATES
The bank bill market was virtually static in July with only a 2bp range over the month in both physical bank bills and 90d BBSW. Both
finished unchanged on the month. Long dated swaps saw strong falls but not as far as ACGBs hence spreads widened slightly.
SWAP & BOND YIELDS (%)
4.90
AFMA BBSW / Swap Rates
4.40
MATURITY
CLOSE
ΔMTH
Δ2MTH
30d
90d
180d
1 Year
3 Year
5 Year
10 Year
15 Year
2.04
2.15
2.25
2.06
2.18
2.58
3.12
3.39
0.00
0.00
-0.01
-0.05
-0.14
-0.17
-0.19
-0.19
0.02
0.00
0.02
0.02
0.00
0.03
0.06
0.06
MTH HIGH MTH LOW
2.06
2.15
2.27
2.12
2.35
2.81
3.45
3.73
2.04
2.13
2.24
2.04
2.14
2.53
3.09
3.35
3.90
3.40
2.90
2.40
3y Swap
10y Swap
5y Bond
©YieldReport
5y Swap
3y Bond
10y Bond
1.90
1.40
Aug 12 Dec 12 Apr 13 Aug 13 Dec 13 Apr 14 Aug 14 Dec 14 Apr 15 Aug 15
GOVERNMENT BONDS
AUST 3Y & 10Y BONDS (%)
3y bonds closed at 1.91%, down 17bps from the previous month’s close
after trading in a range between 1.84% and 2.13%. 10y bonds closed at
2.80%, close to the low for the month at 2.79% and substantially down
from the high for the month at 3.16%. The month started off with the focus
on the Greek debt default to the IMF and when Chinese stock markets
dropped sharply due to leveraged bets gone wrong, there was a “flight to
safety” of bonds even though both events were not seen as contagious to
the world’s banking system. By the middle of the month, Greece had
reached a deal with its creditors and the Chinese government had thrown
billions at its share markets but bonds continued to rally to close at or near
month lows.
UK and US GDP data confirmed markets’ views of a slow recovery while the
July FOMC meeting revealed that US cash rates would soon be on the rise
but was dependent on data showing employment growth was sustainable.
4.50
4.25
4.00
3.75
3.50
3.25
3.00
2.75
2.50
2.25
2.00
©YieldReport
3y
1.75
10Y
1.50
Dec 12 Apr 13 Aug 13 Dec 13 Apr 14 Aug 14 Dec 14 Apr 15 Aug 15
GOVERNMENT YIELD CURVE
3y/10y BOND SPREAD (%)
1.30
July saw a reversal of the steepening in the yield curve which we saw in
June. Long bond yields came back to their end of May levels in the 2.70%
to 2.80% range while at the short end only one further rate cut is priced
in, limiting the scope for further yield downside. The 3y/10y bond spread
closed at 89bps from 97bps previously.
1.20
1.10
1.00
0.90
0.80
0.70
0.60
0.50
©YieldReport
Dec 12
Apr 13
Aug 13
0.40
Dec 13
Apr 14
Aug 14
Dec 14
Apr 15
Aug 15
3
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MONTHLY REVIEW
JULY 2015
Home Page
SEMI GOVERNMENT BONDS
ACGB Apr 23 SPREAD TO SEMIS (%)
There was only the one new semi issued in July and that was from QTC
which added $300m to its existing July 2024 line at a yield around 3.31%
following the release of the 2015/16 budget. Semi yields fell across the
month and spreads were generally maintained, except in the case of
Queensland where the well-received budget saw spreads narrow
further. The 2015/2016 borrowing requirement will be $6.5bn or about
8% higher than 2014/2015, the state is expected to grow at 4.5% and
borrowings are expected to fall from 43.2bn to 38.1bn. Pressure on the
state’s budget is also expected to ease as a pause of several years is
taken on the Qld government’s contributions to the public servants’
superannuation scheme.
ACGB 4.50%Apr 2020
Spread to ACGB
NSWTC 6.00% May 2020
QTC 6.25% Feb 2020
TCV 6.00% Jun 2020
31 July
1m ago
2m ago
2.07
2.29
2.10
2.33
2.43
2.37
2.55
2.70
2.58
2.36
2.48
2.37
0.75
0.70
0.65
0.60
0.55
0.50
0.45
0.40
0.35
NSWTC Apr 23
WATC Oct 23
©YieldReport
Apr 14
CORPORATE BONDS
Jul 14
Oct 14
0.30
QTC Jul 23
SAFA Oct 23
Jan 15
0.25
Jul 15
Apr 15
CORPORATE BONDS vs 3Y ACGB (%)
0.95
July was another busy month of issuance for corporates despite
markets ‘freezing up’ while Greece sorted out its debt crisis. Corporate
yields on our benchmark securities below fell between 15bps and 27bps
with spreads to ACGBs mixed.
ANZ May 16
NAB Feb 17
WPC May 16
TEL Nov 17
WES Nov 16
CBA Jan 18
0.85
0.75
All four of the major domestic banks came out with new issues while
Macquarie came out with arguably the largest issue of the month,
worth US$1.75bn in three tranches towards the end of July. Foster’s
launched a debut issue under its new owner (SAB Miller) and
Transurban Queensland went about refinancing debt due to mature in
2016 and 2017.
The Kangaroo market saw a continued stream of issues but the issues of
note were $650m Apr 2020 at ACGB + 64.75bps by KfW, $700m of Mar
2020 at ACGB + 54.5bps by IBRD and $500m at ACGB + 54bps by ADB.
0.65
0.55
0.45
©YieldReport
Oct 14
Dec 14
iTraxx Series 23 eased a little by the end of the month but as shown in
the chart opposite, it was a rocky ride with the index spiking up to 106.6
at the height of the Greek IMF ‘default’ early in the month, before
settling back again just as quickly.
Feb 15
Apr 15
Jun 15
0.35
Aug 15
iTRAXX AUST SERIES 23
110
105
Bond
31 July
1 Mth ago
2 Mth ago
ACGB 4.50%Apr 20
CBA 7.25% Feb 20
Westpac 7.25% Feb 20
Wesfarmers 4.75% Mar 20
Melb Airport 5.00% Jun 20
Telstra 7.75% Jul 20
2.07
3.10
3.10
3.33
3.52
3.20
2.29
3.37
3.38
3.48
3.71
3.36
2.10
3.06
3.07
3.22
3.47
3.08
100
95
90
85
80
©YieldReport
75
Apr 14
Aug 14
Dec 14
Apr 15
Aug 15
4
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MONTHLY REVIEW
JULY 2015
HYBRIDS
Westpac to issue new hybrid
Last month Westpac announced it would issue another hybrid to add to the other
six already listed on the ASX. It will be issuing $750m worth of ”Capital Notes 3”
which are non-cumulative, convertible, redeemable, perpetual, unsecured notes,
with a margin above BBSW of between 400bps to 420bps. The final margin will be
set in an institutional book-build and the bank may issue more if oversubscribed.
Home Page
Hybrid issue margins
The first call date of 22 March 2021 will be two years before the mandatory
conversion date on 22 Mar 2023 and the now-standard non-viability and capital
trigger event clauses are present. The issue will boost Westpac’s total tier 1 capital
but not specifically satisfy APRA’s new risk weighting requirements due by the 1 July
2016 deadline.
The comments coming out of broking houses is that the issue is likely to be seen
favourably by investors due to the historically high margin. The last three hybrids by
Westpac were issued at margins to BBSW of 305bps (WBCPE June 2014), 320bps
(WBCPD March 2013) and 325bps (WBCPC March 2012). For a comparison with
other major bank recent hybrids issue margin see the chart opposite. Previous issues have seen investors sell existing holdings to take
up new offers and with more hybrid issues likely in coming months this is something investors should be cognisant of.
The Westpac hybrid issue has created weakness in hybrid yields as the
market adjusts to the indicated pricing. Bank subordinated notes and
in particular the Basel III subordinated notes, SUNPD and WBCHB
have moved back towards recent highs.
ETFs
Canada may introduce ETF requirements for advisers
The Mutual Funds Dealers Association of Canada (MFDA) is seeking to introduce standards for advisers wishing to transact in exchangetraded funds. Currently, mutual fund licensed representatives can trade in exchange-traded funds which meet the definition of a mutual
fund under Canadian securities legislation. In 2014 the Canadian ETF Association and others involved in this area provided an industry
solution to make ETFs more accessible to investors. The MFDA proposes mutual fund advisers “receive training on information about
characteristics and features of ETFs, as well as, training on how ETFs will be offered”.
Icahn attacks BlackRock
US hedge fund activist Carl Icahn launched a broadside last month at Black Rock, saying the world’s dominant bond participant was
complicit in pushing the yields of bonds to record lows. Icahn believes the US corporate bond market is in bubble territory and players
such as Black Rock are adding fuel to the fire by marketing bond ETFs to yield-hungry investors. Icahn fears that US yields are too low
and when interest rates do rise, a ‘rush for the exits’ will create a liquidity crisis as there are fewer bond market makers as a result of
regulatory changes. He is not alone in this view as several Australian Reserve Banks officials and ‘Bond King’ Bill Gross have commented
on this lack of liquidity over the last 12 months. Icahn’s main concern and the reason for his attack on Black Rock, is his belief the “high
yield” ETF markets will prove illiquid and there will be “nobody to buy this stuff”.
5
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MONTHLY REVIEW
JULY 2015
Home Page
MANAGED FUNDS
July was a strong month for bond returns, recovering from three very poor months in April, May and June. The Greek debt crisis and
massive volatility in the Chinese sharemarket saw strong global demand for the safety of bonds in July. Long dated bond yields fell
slightly more than shorter dated bonds and this saw semi government and government bonds top the bond index returns for the
month. Semis returned a healthy 1.47% and government bonds returned 1.42%. The composite bond index which covers around 400
securities returned 1.30% while corporate bonds and FRNs returned 0.84% and 0.32% respectively. The bond market is grappling with
an imminent US interest rate rise that now looks most likely in the last quarter of 2015. Do investors stay in bonds or do they move to
equities? The Fed is waiting for data confirmation about the US economic recovery, in particular wages growth. The unemployment
rate has already shown good improvement but wages have not improved markedly. Yearly returns of around 7.00% are shown below.
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
-0.40
-0.60
-0.80
-1.00
-1.20
-1.40
-1.60
12MTH BOND INDEX RETURNS (%)
BLOOMBERG AUSBOND INDICES (%)
8.00
Returns by month
6.69
6.95
7.14
5.86
6.00
4.00
3.34
2.55
2.00
Bank Bill
Government
Corporate
Composite
Semi Government
Floating Rate Note
0.00
Bank Bill
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
14 14 14 14 14 15 15 15 15 15 15
Security
Bank Bill
Jul
15
Composite Government Semi-Govt
Bond
Bond
Bond
Corporate
Bond
FRN
1m Return (%) 12m Rolling Return (%)
2.55
0.18
Composite Bond
1.30
6.69
Government Bond
1.42
6.95
Semi-Govt Bond
1.47
7.14
Corporate Bond
FRN
0.84
0.32
5.86
3.34
GLOBAL BOND YIELDS
GLOBAL 10Y BONDS YIELDS (%)
Record lows in yield were made around the height of the Greek
crisis before markets became concerned about liquidity risk and
trying to exit bond positions. The sell-off in May/June was reversed
partially in July as investors became concerned about the viability of
the euro and the massive volatility in the Chinese sharemarket. This
saw long bonds in particular bought by risk averse investors that
became worried about the damage to global growth prospects.
Australia
France
Japan
Germany
Italy
UK
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
US 10y bonds closed at 2.18% down 17bps and German 10y bonds
closed at 0.61%, down 15bps.
1.00
0.50
© YieldReport
0.00
Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15
6
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MONTHLY REVIEW
JULY 2015
Home Page
NEW ISSUES
Treasury Bond/Note Tenders and Results
Tender No
786
Tnote
787
788
Tnote
789
790
Tnote
791
Tnote
792
ILB 119
793
Tnote
794
Date
1-Jul-15
2-Jul-15
3-Jul-15
8-Jul-15
9-Jul-15
10-Jul-15
15-Jul-15
16-Jul-15
17-Jul-15
23-Jul-15
24-Jul-15
28-Jul-15
29-Jul-15
30-Jul-15
31-Jul-15
Amt to Public ($m)
$900m
$500m
$800m
$800m
$500m
$900m
$900m
$500m
$800m
$500m
$900m
$150m
$500m
$500m
$1.2bn
Bond Details
3.25% 21 April 2025
23 October 2015
4.50% 15 April 2020
3.25% 21 April 2029
23 Oct 2015
4.75% 21 April 2027
4.25% 21 April 2026
23 October 2015
1.75% 20 November 2020
11 Dec 2015
3.25% 21 April 2025
3.00% 20 September 2025
3.75% 21 April 2037
11 Dec 2015
2.75% 21 October 2019
Weighted Avg Yield (%)
3.0447
2.0054
2.314
3.1215
1.99
3.0445
3.0788
2.0098
2.3636
1.9961
2.8239
0.509
2.435
1.9877
2.0142
Coverage Ratio (x)
3.978
3.07
3.894
2.406
3.01
3.267
2.189
3.72
3.948
3.87
2.424
3.373
2.42
3.14
4.525
Semi-Government Bond Issues
Issuer
QTC
Size ($m)
$300m
New / Existing
Existing
Bond Details
5.75% 22 July 2024
Rate
ACGB + 37bps
Corporate Bond Issues
Issuer
Domestic issuers
Toronto Dominion
ANZ
FBG Treasury (Aust)
Citigroup (Sydney)
Royal Bank of Canada (Sydney)
Royal Bank of Canada (Sydney)
Pepper Group
DBNGP Finance
Commonwealth
Macquarie Bank
Macquarie Bank
Macquarie Bank
Police Bank
ANZ
Westpac
Liberty Financial
JP Morgan
ME Bank RMBS
ME Bank RMBS
ME Bank RMBS
ME Bank RMBS
ME Bank RMBS
ME Bank RMBS
ANZ
ANZ
ANZ
Status
Status
Size
Tenor
Rate
Fixed
Fixed
Fixed
Floating
Floating
Fixed
Class AR-U
Floating
Fixed
Floating
Fixed
Fixed
Floating
Floating
Floating
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
Issued
$100m
US$750m
$700m
$600m
$900m
$200m
$138.4m
$70m
CNY330m
US$750m
US$500m
US$500m
$15m
$500m
$500m
$500m
$175m
$1.38bn
$41.2m
$50.2m
$18.7m
$4.5m
$5.25m
CNY130m
$28.12m
US$15.63m
10y
5y
5y
4y
3y
3y
BBSW + 148.25bps
Treasury + 125bps
BBSW + 128bps
BBSW + 125bps
Swap + 72bps
Swap + 72bps
BBSW + 100bps
BBSW + 200bps
n/a
Libor + 112bps
Treasurys + 125bps
Treasurys + 175bps
BBSW + 110bps
BBSW + 25bps
BBSW + 25bps
Fixed
A1
A2
B
C
D
E
Fixed
Fixed
1y fixed
8y
4y
5y
5y
10y
3y
1y
1y
10.5y
5y
5y
5y
ACGB+157.75bps
30d BBSW + 95bps
30d BBSW + 102bps
30d BBSW + 230bps
30d BBSW + 230bps
30d BBSW + 400bps
30d BBSW + 600bps
n/a
n/a
n/a
7
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MONTHLY REVIEW
JULY 2015
NEW ISSUES
Home Page
Corporate Bond Issues (cont.)
Issuer
Domestic issuers
Status
Status
Size
Tenor
Rate
Toyota Finance Australia
Floating
Issued
GBP100m
1y
Libor
DBNGP Finance
Floating
Issued
$55m
8y
BBSW + 200bps
NAB
Floating
Issued
$750m
3y
Libor + 64bps
NAB
Fixed
Issued
$750m
3y
Treasurys + 85bps
NAB
Fixed
Issued
$1bn
5y
Treasurys + 100bps
WBC
Fixed
Issued
$200m
5y
Swap + 90bps
WBC
Floating
Issued
$2.7bn
5y
BBSW + 90bps
Issued
CHF200m
7y
Swap + 25bps
NAB
ANZ
Fixed
Issued
JY80bn
5y
Libor + 89bps
ANZ
Fixed
Issued
CNY405m
5y
n/a
Issued
EUR1bn
6y
Mid swap + 17bps
Westpac
Macquarie Bank
Floating
Issued
EUR60m
3y
Eurobor +30bps
Macquarie Bank
Floating
Issued
EUR40m
3y
Eurobor +30bps
Toronto Dominion
Floating
Issued
$350m
1.5y
BBSW + 48bps
CBA
Floating
Issued
$1.5bn
5y
BBSW +90bps
CBA
Issued
US$1bn
5y
Swap + 72bps
WBC
Issued
US$800m
3y
Libor + 30bps
WBC
n/a
Issued
$30m
n/a
n/a
Transurban Queensland
n/a
Issued
$200m
10y
n/a
Transurban Queensland
n/a
Issued
$300m
12y
n/a
Transurban Queensland
n/a
Issued
$400m
15y
n/a
Westpac
Floating
Issued
$75m
1y
30d BBSW + 37bps
Bendigo & Adelaide Bank
Floating
Issued
$100m
1y
BBSW + 50bps
Inter-American Development Bank
Fixed
Issued
$100m
4.5y
ACGB + 54.75bps
Asian Development Bank
Fixed
Issued
$500m
4.5y
ACGB + 54bps
Nordic Investment Bank
Fixed
Issued
$100m
10.5y
ACGB + 54.5bps
International Finance Corporation
Fixed
Issued
$300m
5.5y
ACGB + 56.75bps
Kommunalbanken Norway
Fixed
Issued
$50m
10y
ACGB + 63.75bps
International Finance Corporation
Fixed
Issued
$50m
10y
ACGB + 49.25bps
Nederlandse Waterschapsbank
Fixed
Issued
$15m
10y
ACGB + 73.25bps
Municipality Finance
Fixed
Issued
$50m
10.5y
ACGB + 67.75bps
KfW Bankengruppe
Fixed
Priced
$150m
10y
ACGB + 56.5bps
Rentenbank
Fixed
Priced
$150m
7y
ACGB + 69.25bps
JP Morgan
Fixed
Priced
$175m
10.5y
ACGB + 157.75bps
Eurofima
Fixed
Issued
$75m
10y
ACGB + 78.75bps
International Finance Corporation
Fixed
Issued
$50m
10y
ACGB + 49.5.5bps
Intl Bank for Reconstruction and Dev
Fixed
Issued
$700m
5y
ACGB + 54.5bps
Nederlandse Waterschapsbank
Fixed
Issued
$25m
10y
ACGB + 73.25bps
Nederlandse Waterschapsbank
Fixed
Issued
$25m
10y
ACGB + 74.5bps
Kangaroos
8
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MONTHLY REVIEW
JULY 2015
NEW ISSUES
Home Page
Corporate Bond Issues (cont.)
Issuer
Kangaroos (cont.)
Status
Status
Size
Tenor
Rate
KfW Bankengruppe
Fixed
Issued
$650m
5y
ACGB + 64.75bps
Bank Nederlandse Gemeenten
Fixed
Issued
$60m
10y
ACGB + 78.75bps
Bank Nederlandse Gemeenten
Fixed
Issued
$45m
10y
ACGB + 79bps
Eurofima
Fixed
Issued
$30m
10y
n/a
Eurofima
Fixed
Issued
$35m
10y
ACGB + 80.75bps
RATING ACTION
Issuer
Suncorp Group Ltd
QBE Insurance
Interstar Millenium
Interstar Millenium
Interstar Millenium
Credit Union Australia
Description
Action
Rating
Agency
Long term debt
Subordinated debt
RMBS(2004-2G,*A,AB,B+)
RMBS(2005-1G,*A,AB,B+ )
RMBS(2006-2G,*A1,A2,AB,B+)
Mutual
Upgrade
Upgrade
Downgrade
Downgrade
Downgrade
Assignment
A+
BBB
A
A
A
A3
Fitch
Fitch
S&P
S&P
S&P
Moody’s
ECONOMIC CALENDAR
Date
03 Aug
04 Aug
06 Aug
07 Aug
11 Aug
12 Aug
15 Aug
18 Aug
19 Aug
20 Aug
27 Aug
31 Aug
Event
ANZ Job Ads
RBA Interest rate decision, Retail Sales, Bal. of Trade,
Unemployment (Jul)
CPI (China)
NAB Business Conditions & Confidence
Westpac consumer conf.
RBA bulletin
RBA minutes, CPI (UK)
CPI (US)
FOMC minutes
Private new capital exp., US GDP Q2
Private sector credit
9
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MONTHLY REVIEW
JULY 2015
NEWS
The Greek Crisis
Greece failed to make the repayment of approximately €1.5bn due
to the IMF on 30 June 2015, officially becoming “in arrears” on its
debt. The Greek government said it would hold a referendum and
Greek voters would decide if Greece should accept the EU
conditions and thereby qualify for more loans or back the Greek
government position and hold out for better terms from its EU
creditors.
Greece closed its banks and saw the No vote receive around 61%
of the vote. Despite this the ‘Troika’ of the IMF, the EU and the ECB
demanded that Greece detail how it would pay back their loans or
prepare potentially for a withdrawal from the euro. History shows
that the Greek government capitulated, despite being against the
wishes of its people, when it realised it had no choice but to accept
the terms proposed by the Troika - terms which were arguably
worse than they had rejected previously.
This saw loans extended to Greece as well as them enter into
further negotiations on tax and welfare reforms and debt
reductions.
Home Page
Sweden cuts rates further
In a move not anticipated by markets, Sweden’s central bank took
its official rate further into negative territory as well as announcing
the expansion of its asset purchasing program. The new rate was
set at -0.35% and an additional $US5.25bn worth of securities will
be bought in what is thought to be an attempt to limit the strength
in the krona.
China’s volatile share market
China’s stock markets suffered their biggest three week loss in
twenty years after falling by nearly 10% on 2-3 July. In what has
been interpreted as a ‘state’ intervention, the country's 21 largest
investment banks said they would spend about US$19.3 billion to
try to stabilize the market and buy stocks themselves.
ASIC releases report on key benchmark rates
In a report addressing potential financial benchmark rigging in
Australia, ASIC provided what is called an overview of the
“importance of financial benchmarks and the need for financial
benchmarks to be robust and reliable” as well as some as the
investigations ASIC is undertaking.
While the situation is not finally resolved, markets are comfortable Benchmark interest rates are set by groups of banks, both
that the pathway is set for Greece to stay in the euro zone and
domestic and foreign, through various mechanisms. These rates
begin the long path back to growth and stability.
are then used as the starting point for pricing many financial
instruments in the stock and bond markets and are often
China rate cut
determinants of commercial lending rates and mortgage rates.
China cut rates for the 4th time since November and cut the
ASIC said several banks had given enforceable undertakings with
amount of cash that banks must hold as reserves in order to
regards to BBSW submissions after it was found some banks had
increase economic growth. The last time there was a simultaneous engaged in practices which may have benefited “house” trading
cut to interest rates and reserve requirements was at the height of and derivatives positions.
the GFC in late 2008.
June unemployment numbers
US unemployment hits 7y low
The ABS released the June Labour Force figures and, as with the
US unemployment dropped to a 7 year low of 5.3% in June as the May numbers, they were better than expected. The
country added 223k jobs.
unemployment number came in at 6.0% as compared to the
consensus expectation of 6.1% and May’s number has been
revised down to 5.9% from the original 6.0% released a month ago.
On top of these figures, the participation rate increased to 64.8%
(seasonally adjusted) so the drop in unemployment does not
appear to be a result of people giving up the search for work.
Commsec and ANZ said the latest ABS labour force figures were
“better than expected”. CBA chief economist Michael Blythe said
the figures indicated the economy was “in reasonable shape” while
UBS believe the data will “give comfort to *the+ RBA to hold rates”.
However, UBS and others expressed some doubts over the
statistical validity of the survey - doubts that have been dogging
the ABS for nearly a year.
Queensland Motorways refinances debt
Transburn announced the issue of $900m of secured notes by its
62.5% owned subsidiary Queensland Motorways. The issues
consists of tranches of $200m, $300m, and $400m maturing in 10,
12 and 15 years respectively.
10
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MONTHLY REVIEW
JULY 2015
NEWS
RBA meeting 7 July
The RBA held its regular first Tuesday of the month meeting and,
as expected, kept the official cash rate steady. The AMP’s chief
economist, Shane Oliver said afterwards he still thought there was
“a 50/50 chance of another rate cut” while Westpac’s Bill Evans
said, "Westpac's current view is that rates will remain on hold
through both 2015 and 2016." CBA’s view is it expects the official
rate to remain at “2.00% over the forecast horizon.” One notable
statement to come from the RBA release was the observation by
the RBA governor, Glenn Stevens, “Despite… China and Greece,
long-term borrowing rates for most sovereigns and creditworthy
private borrowers remain remarkably low.”
Home Page
US bond ‘flash crash’ report released
The long-awaited report into the cause of the October 2014 ‘flash
crash’ in the US Treasury bond market has been released. The US
bond market is one of the most liquid in the world and it shocked
markets when 10y bonds plunged from around 2.20% to 1.86% in
a matter of minutes. Within 15 minutes of this the market was
trading back above 2.00% and by the end of the day the market
had closed at 2.12%. The event became infamously known as the
‘flash crash’.
The report, composed by the New York Fed, the SEC, the
Commodity Futures Trading Commission and the U.S. Treasury
Department stated that the almost unprecedented market
BoE monthly meeting
movements could not be attributed to a single or specific cause,
The Bank of England’s Monetary Policy Committee kept the UK’s
but rather to a number of contributing factors. Among these was
official rate steady at 0.50%, having last changed it in 2009. An
the unprecedented number of short positions being unwound
improving labour market was adding fuel to argument for a higher (many, if not most, market participants were expecting the Fed to
rate but, as with the US Federal Reserve, there seems to be some raise rates), the decline in order book depth, and changes in order
debate as to when to start the process.
flow and liquidity provision. There was also a high level of selftrading where sell orders were purchased by the same party and
Origin may need to cut debt to keep rating
vice versa. "For such significant price movements to rapidly occur
Recent falls in LNG and oil prices may mean Origin may have to cut without a clear catalyst in one of the world's most liquid markets
debt levels in order for it to keep its BBB investment grade status. in such a short period of time is highly unusual," the report said.
Origin’s APLNG project has been a major consumer of capital in
recent years and a sell-down of its stake may be required to
China Q2 GDP
bolster Origin’s balance sheet in light of weaker revenues.
Chinese second quarter GDP figures were released showing a 7%
Macquarie noted Origin’s past reluctance to issue equity which
growth rate which was 0.2% higher than expected. Some concerns
leaves asset sales of part of the APLNG project or its stake in
were expressed regarding the statistical veracity of the numbers,
Contact Energy as possible moves.
especially in regards to the large change of the price deflator
component.
Covered bond market
Westpac and Commonwealth were active in the covered-bond
AGL: asset write-downs and sub notes
market with WBC issuing US$800m of 3y bonds at Libor + 30 bps
AGL announced write-downs of an additional $600m across
while CBA issued $US1bn of 5 y bonds at 45bps over Swap for an
various upstream energy assets. The announcement had little
Australian equivalent of Swap + 72bps. These yields are up on
effect on its ASX listed subordinated notes.
similar issues last year where “big four” banks issued covered
bonds offshore at rates close to Libor.
Fortescue bonds under issue price
Fortescue’s 9.75% March 2022 notes went under their issue price
APRA report says banks need to hold more capital
for the first time since their placement in April. Concerns about
The financial system inquiry chaired by David Murray called for
China’s economy, the flow-on effect to iron ore prices and a
Australian banks to be “unquestionably strong” with capital ratios general flight to safety appear to have spooked holders and
in the top quartile of internationally active banks. Australia’s
potential buyers.
banking regulator, APRA, has said that this would require banks to
hold a further 200bps of common equity tier 1 capital in order to
NAB June business surveys
achieve this benchmark. However, APRA said that the results of its NAB released its monthly business confidence and business
study "will inform, but will not ultimately determine, APRA's
conditions surveys and both showed a big increase. Conditions
approach for setting 'unquestionably strong' capital adequacy
increased 5pts to 11pts and confidence increased 2pts to 11pts.
requirements" and that APRA "regards the top quartile positioning Lower interest rates, a lower dollar and a good reaction to the
as a useful 'sense check' of the strength of the Australian
Federal budget all contributed to more positive survey results.
framework, but does not intend to tightly tie Australian
NAB said “Improvements in both confidence and conditions over
requirements to a benchmark based on the capital adequacy ratios recent months are starting to suggest a more convincing
of international banks". APRA’s view is likely to be well received by turnaround in the non-mining sectors is underway.” However, the
Australia’s banks that have been worried that APRA would enforce bank’s chief economist, Allan Oster said there was a “disconnect”
a rigid formula for capital requirements that were set by
between the survey results and what businesses actually planned.
international standards and failed to take into account the
strength of the local banking system.
11
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MONTHLY REVIEW
JULY 2015
NEWS
APRA’s new mortgage risk weightings for the big four + 1
Following on from the international capital comparison study,
APRA announced an increase in risk weightings for residential
mortgages for the big four banks and Macquarie. APRA has
determined that the average risk weighting across these banks
must bet at least 25% (compared to approximately 16% at
present). This is seen as an interim measure until the Basel III rules
are finalised and will come into effect on 1 July 2016. APRA
estimates the changes will necessitate the banks increasing their
minimum capital requirements by approximately 80bps in the next
12 months and Morgan Stanley suggests this could be around
$12.5bn in fresh capital. CBA will be watched closely for comment
as it will be the first bank to report its earnings in August. The
move is seen not only as reducing the risk of a systemic crisis based
on mortgage risk but as a win for the smaller regional banks in
their ability to compete on mortgage products. The report can be
found here.
Home Page
UK CPI figures
The UK’s CPI was unchanged in the year to June and slightly down
on expectations. The result compares with a 0.1% increase to May.
Annual “core” CPI fell back to 0.8% from the 0.9% increase
recorded in May.
2015/2016 Queensland Budget
The Queensland government tabled its 2015/2016 budget
forecasting a $962m operating surplus in 2014/2015 and a $1.2bn
surplus in 2015/2016. The 2015/2016 borrowing requirement will
be $6.5bn or about 8% higher than the 2014/2015 requirement of
$6bn, assuming a $1bn inflow as a result of budget measures.
Gross state product is forecast to grow at 4.5% which is up from
the previous year’s recorded 2.3% while expenditure is expected to
increase by 4.3%. Borrowing will fall from $43.2bn in 2014/15 to
$38.1m but this is mostly from shifting debt to government-owned
businesses. Pressure on the level of state debt will be eased by a
suspension of defined benefit contributions for public servants,
which will go some way towards offsetting an expected $3bn
reduction in the amount to flow from mining royalties.
Janet Yellen congressional testimony
Janet Yellen gave her semi-annual report to members of Congress
and repeated her view of likely future interest rate increases.
Mirroring speeches she has given over the last month, the federal
reserve chief again stated the process of normalising interest rates Queensland treasurer, Curtis Pitt said S & P and Moody’s “initial
would begin later in the year assuming the economy grew as
response was one of no change”. Queensland currently has a AA+
expected.
rating from S&P and Aa1 rating from Moody’s.
WA avoids S&P downgrade
WA has avoided a downgrade from S&P, keeping its AA+ rating but
at the cost of acquiring a negative outlook. S&P said it expected
WA’s revenues to improve over coming years but at the same it
noted the government would need to keep a tight rein on spending
if it means to avoid a downgrade.
Toronto Dominion makes debut on its own account
Toronto Dominion priced an 18 month Kangaroo bond in its debut
kangaroo issue of its own debt. TD has been an active arranger for
Kangaroos for other parties in the past but this is its first time on
its own account. TD senior debt has a AA- rating from S& P and a
Aa1 rating from Moody’s and it issued $350m of the floating rate
notes.
Canadian central bank cuts rates
The Bank of Canada, lowered its benchmark interest rate to 0.50%
from its previous 0.75%. The change was expected as Canadian
GDP is likely to be negative for both the June and March quarters,
meeting the technical definition of an economy in recession.
Debenture fund freezes redemptions
The Adelaide-based Angas Fixed Interest Debenture Fund ordered
a freeze on redemptions for at least 18 months. The freeze follows
a Federal Court order in April after the trustee to the fund
commenced legal proceedings against Angas. A meeting of
debenture holders has been called for in August 2015 where Angas
will put forward a proposal to run down the loan portfolio and
make scheduled repayments to holders.
BoE chief thinks UK rates could rise at end of year
The BoE governor signalled the start of rising official interest rates
in the UK is likely to begin around the end of 2015. Mark Carney,
the former chief of the Bank of Canada, said the decision to raise
rates would need to be addressed “by the turn of this year” but in
doing so he made several qualifications; “headwinds to growth and
inflation remain”, important parts of the UK economy were
running below their historical averages, the pound has risen
appreciably and fiscal policy was tightening, all of which detract
from inflationary pressures. He then addressed the likely trajectory
of UK rate rise by saying the path to “more normal levels…will be
longer and shallower than those of the past” and interest rate rises
would proceed to a level” about half as high as historical
averages.”
Second AOFM RMBS auction
The AOFM held the second scheduled auction of RMBS bought by
the Federal government during the GFC in order to inject liquidity
into the banking system. The second of several RMBS auctions,
bids were accepted for approximately $260m of the $3.2bn in
original face value terms on offer. The amount sold is even less
than the June auction, both in absolute size and in percentage
terms and is clearly a concern to the Federal government as it
seeks to sell the RMBS at a ‘fair’ price. The next auction will be held
in August.
12
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MONTHLY REVIEW
JULY 2015
Home Page
NEWS
Australian June CPI figures released
Prior to the release of the June quarter CPI, economists were
expecting a 0.8% rise for the quarter and a 1.7% rise year on year.
The underlying inflation figure, which strips out the more variable
component of the measure, was expected to come in at 0.6% for
the quarter and 2.2% for the year. The actual results were as
follows:
New issue of Qld 2024 bonds
QTC issued another $300m of its existing 22 July 2024 series
following the issue of $1bn of the same line in late May. The bonds
were issued at margin of EFP + 32bps. The tender was well bid and
had a coverage ratio of 4.73x. Earlier this month the Queensland
government tabled its 2015/2016 budget and reported a funding
requirement of $6.5bn
June Qtr CPI: 0.7% (+0.2%)
Mar Qtr CPI revised up 0.1% to 0.7%
CPI to June year end: 1.5%
June Qtr u/lying CPI: +0.5% (Mar Qtr 0.7%)
U/lying CPI year to end of Jun: 2.3% (yr to end of Mar 2.4%)
Future Fund increases cash holdings
The $117b Future Fund is sitting on $20bn of cash which
represents nearly one fifth of the fund’s assets. The Fund’s head of
debt and alternatives, Jame Swaldron told a conference cash as a
percentage of assets had risen from 15% held in March. He said
the reason for the high proportion of cash was because much of
the equities, bonds and alternatives market were overvalued as a
result of the low-interest rate environment.
Stephen Koukoulas said there is “nothing in the CPI to sway *the+
RBA…it “reflects sub-trend growth and weak labour markets.”
Westpac said the headline rate was less than expected due to
unexpected food price effects but the core inflation rate was
expected. NAB’s David De Garis said, “Moderate inflation…would
buy the RBA more time to leave…policy unchanged”. He expects
rates to remain unchanged this year before rising next year.
ANZ said there was nothing to stop the RBA from cutting rates.
“With sub-trend growth, low wages….low inflation and strong
competitive pressure, the inflation outlook is not a constraint.
Shane Oliver: inflation is “benign” and not low enough to bring
RBA cut. He still thinks rate cut odds are 50 /50.
Janus Capital to buy Australia’s Kapstream Capital
Janus Capital, the fund manager where ‘Bond King’ Bill Gross
settled after leaving PIMCO, is buying Kapstream Capital, the
Australian active bond fund co-founded by Kumar Palghat and Nick
Maroutsos. The deal is said to be for 51% of the business for a
$111m upfront cash payment and with an option to buy the
balance of 49%.
Puerto Rico asks for moratorium on debt
The governor of Puerto Rico said the island, a US commonwealth,
COBA congratulates APRA on removing “distortion”
could not pay back its estimated US$70bn in debt. Garcia Padilla
The Customer Owned Banking Association, which represents
said the country needed to postpone for several years its debt
smaller banks, credit unions and friendly societies welcomed APRA payments while the island sought to return its economy
announcement of stricter capital requirements for mortgages. The to growth.
CEO of COBA said the decision “brings us closer to a level playing
field”. Under the current regime, major banks could allocate a
ANZ cuts GDP forecast
lower amount of capital than other mortgage lenders. This gave
ANZ has revised down their growth forecasts for Australia. GDP is
the majors a funding cost advantage and was “distorting the
now expected to come in at 2.3% for 2015 (down from 2.5%) and
market”. Suncorp Bank, Bendigo and Adelaide Bank, Bank of
2.6% for 2016 (down from 3.0%). ANZ still expects unemployment
Queensland and ME released a statement which said,
to peak at around 6.5%.
“Standardised banks are already required to hold more capital …on
their residential mortgage exposures. This remains unchanged.”
Great wave of money
For all the turmoil going on in China’s stock markets, Aberdeen
Asset Management’s Nick Bishop thinks China’s effect on the
global asset prices is still yet to be properly felt. Even if Chinese
government agencies carry huge debts, household savings are
substantial and if the restrictions on capital movements to the rest
of the world were eased or lifted Chinese capital flows would
“boost real assets around the globe even if its economy is
slowing”.
ANZ GDP forecast
New Zealand central bank cuts rate
The Reserve Bank of New Zealand cut its cash rate target by 25bps
to 3.0%. The Bank said New Zealand’s growth outlook was soft,
inflation was below its 1% to 3% target and dairy prices had “fallen
sharply”. New Zealand was one of the few countries to put rates
up in recent times and this move is a partial retraction of the
increases in 2014.
13
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Home Page
INSIGHT: APRA’S call for increased bank capital
The release of APRA’s International Capital Comparison study is its
first response to the last December’s Murray Financial System
Inquiry. The main finding is that Australia’s big four banks will need to
bolster their capital to a significant extent in order for them to be
resilient enough to withstand future shocks. The study found
Australia’s major banks have common equity tier 1 (“CET1”) ratios
outside the top quartile of international peers, even though they are
above the median. According to APRA the major banks would need at
least 70 basis point of extra CET1 to reached bottom of the top
quartile or an extra 200 basis point of CET1 to have them
“comfortably positioned”. The Murray report called for banks to be
"unquestionably strong".
INSIGHT: Income securities buyback?
Income securities were among the earliest hybrids issued and
as the hybrids market grew more sophisticated the price of all
of them drifted down below the issue price of $100 (par value).
For some years now income securities such as NABHA, MBLHB,
WOWHB and BENHB have traded consistently below par value.
There are two reasons this has occurred.
The first, is that issue margins in the 1990s were much lower
than today and the current price simply reflects current yields.
The second reason for the income securities to trade at less
than face value is the perpetual nature of the instruments. It is
uncertain when investors will get their capital back. Most
hybrids have maturity dates or exchange dates when the
One of the major issues is the risk weightings that the big four banks
securities will be redeemed - subject to several conditions
apply to mortgages or the level of capital they are required to hold
being met (such as the share price being above 50% of the
for every dollar loaned. This varies between the big four and is
“issue date” share price). Income securities’ redemptions are at
significantly different from the regional banks. The big four use a
the discretion of directors and so far the directors have shown
system called the internal ratings based approach to calculating
little inclination to redeem these securities.
regulatory capital and this has allowed the banks to calculate their
Some issuers, such as Macquarie and Bendigo & Adelaide Bank,
own level of risk based on their detailed default histories, valuations
have been inclined to buy back some of the income securities
and customer risk analysis. The regional banks are required to use
APRA's standard risk weighting models. The upshot is that the big four at a sizable discount to the issued price / par value but at a
are only required to hold around 18-20% of capital for every dollar of premium to the market-traded price. This has fuelled
speculation that others may follow suit. The new Basel III rules
mortgage lending. This compares to the regional banks that are
add impetus to the banks to do something as income securities
required to hold around 32-35%. This provides the big four with a
large competitive advantage over the regionals but also exposes them are not Basel III compliant - they don’t have the conversion
trigger or the write-off clauses necessary to be treated in this
to greater risks if Australia suffers large house price shocks.
way. From 2012, the amount of income securities that count
towards a bank’s capital ratio is mandated to decrease
The big banks will have about 12 months to raise more capital and
gradually. By 2022 it will be zero and they will count nothing
change their mortgage risk weightings from 18% to between 25%towards a bank’s capital ratio. Unless the banks consider the
30%. Regional banks already have risk weightings in excess of 30%
and will not be affected. According to various analysts, around $28 to income securities to be such inexpensive forms of financing,
there may be an incentive for the banks to redeem them by
$40 billion dollars of additional capital would be needed meaning
2022. However, banks may be inclined to take the route
some weighty new debt or equity issues could be on the horizon.
Bendigo Bank took in 2010 and 2012 and just buy them back at
the current price plus a premium.
NAB has already raised $5.5bn of that with its recent rights issue but
it remains to be seen how the other banks respond. CBA and ANZ are
thought to be mulling new issues and may be waiting for the current
volatility over Greece to settle before deciding how best to respond.
The recent trend in bank capital raising has been to issue hybrids
securities rather than ordinary shares and these hybrids have been
issued with terms which qualifies them as CET1 capital. However, the
very terms which make them qualify as CET1 are the ones which have
got fellow regulator ASIC concerned on behalf of retail investors.
APRA is, of course, concerned with overall bank stability while ASIC is
concerned with how various securities are marketed and sold to retail
investors. “Non-viability triggers”, common in hybrids, either mean
the hybrids convert to ordinary share capital or are written off in
times of financial distress. These triggers satisfy APRA but it is those
sorts of complicated terms and the pricing behaviour of hybrid
instruments that concern ASIC and that are sometimes
misunderstood or overlooked by retail investors.
14
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JULY 2015
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INSIGHT: The key issues facing bond markets
by Vimal Gor, Head of Income and Fixed Interest, BTIM
In his June monthly newsletter, Vimal Gor from BT Investment Management outlines the key issues facing the bond market. BT is a
leading performer in our Australian bond fund tables over the last 12 months.
The global reflation trade has no legs but the bond sell-off probably isn’t done
Inflation is starting to rise on the surface but the deflationary impact of China’s excess supply will continue to flow through the system.
The perception that the Fed will raise rates this year and recent increased volatility will lead to a lower demand in bonds than seen in
the past. Large global rate moves have seen huge changes in price relativities. For example, German Bund yields during March and April
were trading at far less than half the average Japanese bond yield of approximately 0.35% and are now nearly trading at twice the
current yield of 0.48%.
The FOMC doesn’t want to lift interest rates despite all the talk, but the picture is still good for the US Dollar
The FOMC meeting in early June was a very important one as it was meant to be the meeting that the FOMC officially signalled that the
first rate hike would be in September, ending a frustrating period of low volatility through the Federal Reserve’s desire to try and
control the yields at every point of the yield curve with forward guidance. The outtake from the meeting was far more dovish than the
market was expecting, with no explicit signalling of a rate hike, downgrades to growth and inflation, and a reduction in the fabled “dots”
for 2016 and 2017. The Fed had given the green light for lower yields and steeper curves.
The pressure for rates to rise in the UK is increasing
There is one market where moves higher in yield have been somewhat justified by the underlying economic data: the UK. The
improvement in unemployment has finally worked its way through to wage growth which is something the US data has struggled to
show. This leaves the BoE in an interesting position. If the trends in wage growth and inflation continue, are they prepared to hike rates
before the Fed does?
The RBA will (sadly) be swung towards staying on hold by a falling unemployment rate
While there has been a lot of concern over the (lack of) funding of the Australian Bureau of Statistics as a reason for the low quality of
Australian employment statistics, the fact remains that the trend in the unemployment rate appears to have turned downwards after
reaching a high of 6.4%. The improvement in the unemployment rate also matches up with a number of other employment series not
calculated by the ABS that expected a turn earlier this year. The key data which we think the RBA should have reacted to earlier this
year has continued to have gone unnoticed. Income growth is slower than it has been in 15 years and is still falling despite the
improving employment statistics. Chinese easing hasn’t produced any dividends for bulk exporters as late 2015 prices for iron ore have
once again slipped below the $50 a ton mark, placing pressure again on marginal producers. GDP growth forecasts will also continue to
be downgraded by the Bank as the non-mining economy outside of residential construction shows little activity and exports slowdown
from contributing a large amount to GDP. We worry that the RBA will ignore all of these other indicators of poor performance and focus
on the unemployment rate. The question isn’t whether hikes aren’t even a consideration (if the Fed hikes this year it will be 6 years
since they saw the peak in unemployment), but that they delay needed cuts for longer than necessary.
The full report can be read here.
15
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INSIGHT: What’s in a bond ETF?
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Some things sound more complicated than what they really are. Many professions use language which is alien to normal people and
this especially true in the finance sector. Exchanged traded funds, or ETFs, fall in to that category and in this Insight we will explain what
ETFs are and how they work.
A managed fund is simply a fund that is managed by an investment professional. The manager solicits funds from investors and then
invests those funds according to the investment mandate. The fund is usually a unit trust structure where units can be applied for and
redeemed directly with the manager. In a recent innovation this can now be done on the ASX through its mFund platform.
ETFs are very similar. They are a professionally managed funds but units can be bought and sold on the ASX like ordinary shares. The
fees charged by ETFs are typically lower than a regular managed fund making them easier and cheaper to invest in. The settlement time
is also much shorter than a traditional fund which can take 3 or 4 weeks to redeem units or in some cases after the end of the month.
What’s in an exchange traded bond fund?
Bonds, of course. Depending on the fund these can be Australian government bonds, state government bonds (also known as semis or
semi government bonds) or international bonds. There are even ETFs for inflation linked bonds (where the returns are adjusted for
inflation). Some of the ETFs replicate an index (much like a share fund manager might seek to replicate the S&P/ASX 200) and some
allow the manager some discretion as to how the fund is traded.
Below is a table of the assets held by the Russell Investment’s Semi-Government Bond ETF. This ETF tracks an industry-recognised
benchmark index of bonds issued by Australian state governments. Active ETFs will hold bonds in different proportions to the
benchmark index as they seek to outperform by holding less of the poorly performing bonds and more of well-performing bonds.
Source: Russell Investments Semi Government Bond ETF. 31 May 2015
So that’s an ETF. They come in different sizes and with different investments and allow investors to invest in different asset classes.
There are ETFs filled with Australian commonwealth government bonds, cash ETFs, international bonds, inflation linked bonds and
those like the Russell semi government bond ETF shown above. Investing directly in bonds can be quite difficult for individual investors
due to minimum size requirements and other factors. ETFs get around many of those issues and as such are increasing in popularity
very quickly.
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INSIGHT – Study of financial literacy of Not For Profit directors
A majority of Australian Not for Profit board directors do not
have the financial literacy skills to meet the changing challenges
of the future, including the impact of new funding models,
according to the findings of the Grant Thornton Financial Literacy
Survey and published in the Pro Bono Australia monthly board
report.
The Financial Literacy Survey, a collaboration between Grant
Thornton and Pro Bono Australia, set out to understand the state
of play in the Not For Profit sector in terms of the impact of new
funding models and the ability of senior managers and Board
Directors to deal with emerging financial issues and future
sustainability. The survey found that only 59% of Not For Profit
board members feel their board has the right level of financial
literacy skills to meet the needs of their organisation today and
even less, 40%, believe they have the skills to handle the financial
challenges in the future. The findings of the survey reveal that
across all skills, there is room for Not For Profit boards to improve
and, when asked to rate the strength of each board’s skill level,
participants only assessed their strength as ‘moderate’. “The
reality is that the changes underway won’t be reversed and the
challenge will be how organisations bridge this gap,” the national
Head of the Not For Profit Industry Group at Grant Thornton,
Simon Hancox said. Some 1065 respondents from small, medium
and large organisations provided feedback for the survey.
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financial performance. “It also involves including a financial literacy
component to the board evaluation process, which helps identify
directors’ needs. Finally, it involves organising training, either
internally or externally, to address those needs.” The survey found
that the overall performance rating of board directors increases as
the size of the organisation increased, with the biggest differences
occurring in the ‘strategic’, ‘critical’ and ‘legally aware’ skill sets.
“Across all eight skill sets the performance level is lowest where
the directors are appointed solely from the member base,” Hancox
said.
“Another area of discussion within the Not For Profit sector, and
one that has been evident for some time, is whether directors of
Not For Profit organisations should be remunerated. “In the survey
we sought to assess whether a paid board exhibited higher
financial literacy traits. An analysis of the responses indicated that
the paid boards’ performances was only marginally stronger than
the unpaid boards across the eight skill sets.” In looking to the
future, the survey sought to identify those financial literacy skills
required by boards to face the challenges of change and to ensure
their organisation’s future financial viability.
“The results of the survey clearly indicate that there is a need to
improve the financial literacy of Not For Profit boards, particularly
to deal with the challenges of the future. This raises questions such
as, ‘Who is responsible?’ and ‘How can it be done?’ Survey
respondents gave clear responses to what they thought,” Hancox
said. “When the question was posed ‘Who is responsible for
ensuring financial literacy?’, 71% believed the responsibility rested
with the individual board member and with the support of the
organisation. “The answer to the second question, ‘How can it be
done?’ didn’t come from a direct response to a question but rather
from an analysis of the results from a series of questions on
director education. That analysis showed that where there was a
focus on director education the level of financial literacy was
assessed as being higher. “Of concern is that the survey showed
only a small percentage of organisations focused on financial
literacy education for their Directors. For Director induction, while
75% of respondents said their organisation had such a program,
only 36% said that it included financial training,” Hancox said.
The report found that percentages were very similar for board
evaluations, with 62% performing evaluations but only 25%
including an evaluation of financial literacy. These results vary with
the size of the organisation, however, the highest percentage of
organisations conducting financial literacy evaluations was only
38%. “The poorest result was recorded in relation to providing
financial training for directors, with only 18% of respondents
saying their organisation did so,” Hancox said.
“Ideally, directors’ financial education begins with adding a
financial element to the new director induction process to ensure
incoming directors understand what drives the organisation’s
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INSIGHT – Term deposits for primary producers reach almost $5bn
The Farm Management Deposits scheme is a government scheme that
allows eligible farmers and primary producers to deal more effectively
with fluctuations in cash flows. It helps increase their self-reliance by
helping them manage financial risk and business costs in low-income
years by building up cash reserves in higher income years. The scheme
effectively helps primary producers to smooth their incomes and
manage their financial risks over agricultural cycles.
Regular term Deposit vs Farm Deposit Scheme
Term
Income deposited into a FMD account is tax deductible in the year the
deposit is made and it becomes taxable income in the year in which it is
withdrawn. This provides eligible primary producers with the ability
to set aside pre-tax income from primary production in years of high
income, which they can draw on in years of low income.
6m
Regular term
deposit rate
2.35%
FMD special
rate
2.85%
12m
2.40%
3.00%
24m
2.65%
3.05%
*for deposits b/n $100k and $400k. Source:NAB
Special FMD accounts at banks are used to manage the scheme and
these accounts usually receive higher rates of interest than regular term
deposits as shown in the table to the right.
Growth in FMD scheme
The FMD scheme has grown in popularity but might also be seen as a proxy for how well the rural sector is performing. Savings in the
latest data to 30 June, 2015 are $4.6bn and this was held by 48,487 producers. This has increased from $4.1bn in 2014, $3.7bn in 2013
and $3.5bn in 2012. The chart below shows a breakdown by year and by state.
FARM MANAGEMENT DEPOSITS ($m)
1,200
5,000
4,500
1,000
4,000
3,500
800
3,000
600
2,500
2,000
400
1,500
1,000
200
500
0
2001
2002
NSW
2003
2004
VIC
2005
QLD
2006
2007
SA
2008
WA
2009
2010
TAS
2011
2012
ACT & NT
2013
2014
2015
TOTAL (RHS)
Source: Department of Agriculture
a
March 2009 quarter figures have been adjusted to reduce duplication of holders who have more than one account and attribute them to different commodities.
b
Figures for the states in the March 2007 quarter are showing an increase, while the total value of deposits have decreased. This is due to corrections made to previously
incomplete state/industry data from some Authorised Deposit–taking Institutions.
c
d
June 2006 data does not include $161 million that could not be allocated to any state.
The fall in ACT & NT FMD holdings in December 2004 resulted from a particular financial institution correcting a previous categorisation error in its reporting systems.
18
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INSIGHT – Term deposits for primary producers reach almost $5bn
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FMD scheme growth (Cont.)
From 2002 to 2010 the total savings in the FMD scheme were relatively stable but the last few years has seen strong growth in
deposits. This might reflect surging rural commodity prices with dairy and cattle in particular seeing increased demand and record
prices in the past 4 years.
The FMD scheme was introduced in 1999 by the then Howard government as a way of building resilience and self-reliance amongst the
farming community. It also allowed the rural sector to bank gains in good years and draw down on those deposits when times were bad
or natural disasters strike.
There are changes scheduled for July 2016 that could see even more money deposited into the FMD scheme. The changes include an
increase in the cap on funds allowed to be held in an individual account, which will double to $800,000, and legislative changes that will
allow FMD account funds to be used to offset a loan.
FMD scheme conditions
The FMD scheme has a number of conditions including:
a primary producer’s non–primary production income must be less than $100 000 in the financial year they make the deposit
a primary producer may hold up to a maximum of $400,000 in FMDs with multiple Authorised Deposit-taking Institutions (for example
a bank, credit union or building society to be classified as an FMD, the deposit must be held for at least 12 months with an ADI)
Basic rules of the FMD scheme
the deposit must be with an FMD provider
you must be a primary producer when you make the deposit
the deposit must be made on behalf of one individual Deposits are deductible in the income year in which you make them
the minimum deposit or redraw is $1,000
the maximum of all deductible deposits you hold at any one time is $400,000
interest on deposits is assessable in the income year in which it is paid
the tax deduction allowable in any income year is limited to the taxable income derived from a business of primary production in that
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INSIGHT – How much hybrid yield is enough?
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APRA’s recently announced rules on the risk weightings
for the big four banks and Macquarie have seen a big
focus on potential hybrid issues from the big four banks.
Westpac announced a new hybrid issue which will go
towards increasing its Additional tier 1 Capital. The new
hybrid (ASX code: WBCPF), will be issued at a margin to
BBSW of between 400bps and 420bp, set in a book build
process. The obvious question is, “what margin is
enough?”
Opposite is a rather busy diagram of many of the new
issues of the major banks and a few regionals since
2009. It shows the margin at which the hybrids were
initially issued as well as the year of issue. Then the
current trading margin has been added to show how
each particular security has fared since then.
To make things a bit clearer, the regional banks were
dropped from the diagram and then it was split into
four; one for each of the majors.
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TERM DEPOSITS 250k to $1m+
1 mth
nom
Institution
ANZ
CBA
NAB
Westpac
ADCU
AMP Bank
Arab Bank Australia
Bank of Melbourne
bankmecu
BankSA
Bank of Baroda Australia
Bankwest
Bank of Sydney
BankVic
Beyond Bank
Bendigo Bank
BOQ
Citibank
CUA
Defence Bank
Delphi Bank
Greater Building Society
Heritage Bank
Horizon Credit Union
HSBC
IMB
ING DIRECT
Investec Bank Australia
Macquarie Bank
ME Bank
Newcastle Permanent
People's Choice Crdt Unn
Police Bank
P&N Bank
QT Mutual Bank
Rabobank Australia
RaboDirect
Rural Bank Limited
St.Grge Bank - Except VIC
Suncorp Bank
Teachers Mutual Bank
The Capricornian
UBank
Victoria Tchrs Mtual Bank
Aa2
Aa2
Aa2
Aa2
n/a
A2
BB+ ^
Aa2
n/a
Aa2
Baa3
Aa2
n/a
n/a
n/a
A2
A3
A3
BBB+^
BBB+^
n/a
BBB^
A3
n/a
A1
BBB^
A2
Ba1
A2
A3
A2
n/a
BBB+^
n/a
BBB+^
Aa2
Aa2
A2
Aa2
A2
BBB+^
n/a
Aa2
Baa1
3 mth
nom
4 mth
nom
2.15
2.00
2.25
2.00
2.70
2.05
2.15 2.75
2.25
2.50 2.70
2.00
2.00 2.00↓
2.65
2.00
2.00 2.00↓
2.95
2.95 2.95
2.00
2.00 2.70↑
2.65
2.65 2.75
2.65
2.65
2.00
2.45 2.50
2.50
2.70 2.70
1.11
1.21↑ 1.27↓
2.00
2.30↓ 2.50↓
2.50
2.05
2.55 2.60
2.00
2.00 2.80
2.50
2.60 2.85
2.00
2.00 2.40
1.90
2.00 2.35
2.00
2.00 2.00
2.70
2.35 2.85
2.10
2.6↓
2.30
2.30 2.65
2.00
2.00 2.60
2.75 2.75
2.85↓
2.65 2.80
2.65
2.75 2.85
1.25↓ 1.75↑ 2.40
2.35
2.70
2.00
2.00 2.50
2.00
2.00 2.00↓
2.20
2.30 2.60
2.90
2.40
2.20
2.76
2.05
2.05 2.65
1.90
2.35↓
2.00
2.25
2.70
2.55
2.75
2.30↓
2.65
2.30↑
3.00
2.00↓
2.75
2.50
1.90
1.90↓
2.00
2.00
2 mth
nom
Best
Rates
1.90
2.00
2.00
2.00
5 mth
nom
1m
3m
9m
1y
2y
3y
4y
5y
2.95 2.95 3.10 3.10 3.15 3.20 3.25 3.30 3.50
6 mth
nom
9 mth
nom
2.20
2.00
2.35
2.30
2.80
2.90↑
2.90
2.35↓
2.65
2.35↓
3.10
2.70
2.70
2.75
2.65
2.40 2.25
2.65
2.85 2.90
2.90
1.57↑ 1.60
1.65↓
2.70↓ 2.80↓ 2.90↓
2.60
2.55
2.65
2.70↓ 2.70↓ 2.70↓
2.75 2.75
2.80
2.40
2.40
2.00 2.00
2.40
2.00 2.00
2.00
2.70
2.90
2.90
2.65↓
2.75
2.90 2.65
2.65
2.40 2.90↑ 2.60
2.75 2.75
2.75
2.80↓
2.75 2.75
2.85
2.50 2.50
2.85
2.10 1.80
2.50
2.80
2.00 2.00
2.65
2.30↑ 2.00
2.35↓
2.70 2.40
2.70
2.80 2.80
2.85
2.50
2.76
2.96↑
2.65
2.75
1.90
2.00
2.05
2.00
2.80
2.90
3.10↑
2.00
2.65
2.00
3.10
2.00
2.25
2.50
2.65↓
2.40
2.90
1.86↓
2.80
2.70
2.45
2.70↓
2.70
2.50
2.00
2.00
2.70
2.85
2.70↓
2.65
2.40
2.75
1.90
2.00
2.00
2.00
2.70
2.55
2.75
2.00
2.65
2.00
3.00
2.00
2.30
2.50
6m
1y
2.30
2.45↓
2.40
2.40
2.85
2.90
3.00
2.45↓
2.85
2.45↓
3.15
2.90
2.70
2.80
2.65
2.70
3.00
1.81↓
2.90↓
2.70
2.75
2.70↓
2.75
2.60
2.30
2.00
2.90
3.00
2.80↑
2.90
2.60
2.90
2.80↓
2.85
2.90
2.80
2.95
2.45
2.55
2.80
2.85
2.25
2.70
2.00
2.45↓
2.80↓ 2.8↓
2.85
3.05
2.70
2.76
2.95
2.75
2.85
2y
3y
4y
5y
2.60
2.60↓
2.65
2.65
3.00
2.70
3.05
2.70
2.95
2.70
3.20
2.90
2.65 2.70
2.70↓ 2.80↓
2.70 2.75
2.65 2.70
2.90
2.90↓
3.00
3.10
2.70
3.10
2.75
3.05
2.75
3.25
3.00
2.75
3.20
2.80
2.80
3.30
3.10
2.80
3.25
3.10
3.10
3.30
3.15
2.90
2.70↓
2.75
3.05
1.60↓
3.00
2.85
2.75
2.90↓
2.85
2.70
2.40
2.7↓
3.00↓
2.97↓
2.80↑
3.00
3.00 3.10
2.85↓ 3.00↓
2.80 2.90
3.10 3.20
1.63↓ 1.75↓
3.10
3.20
3.00↓
3.10
2.80 2.90
3.20↓ 3.30↓
3.00 3.10
2.80
2.50 2.50
2.80↓ 3.00↓
3.10
3.40↓
3.20
3.00
3.00
3.30↑ 3.40↑
3.00
3.05
2.75
3.00
2.75
2.70
3.00
3.00
3.10
3.10
3.00
3.15
2.80
2.75
3.00
3.05
3.10
3.10
3.00
3.20
2.90
2.80
3.00
3.10
3.50
3.10
3.10
3.00
2.90
2.95
3.00
3.10
1.78↓
2.75
3.10↓
3.08↓ 3.22↓ 3.38↓
2.90↑
3.00↑
3.00 3.10 3.20
*For comparison purposes rates to 1y are paid at Maturity. Rates longer than 1y are paid annually. Rates are checked each day on company
websites and rate sheets. Underlined rates have changed today. Highest rate is shaded. Ratings are Moody’s except those marked ^ which are S&P.
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AUST GOVT BONDS
MATURITY
COUPON (%) ISSUE SIZE ($M)
CLOSING YIELD
Δ MONTH
Δ 2 MONTHS
MONTH HIGH MONTH LOW
21 Oct 15
4.75
11399
2.01
0.02
0.02
0.00
0.00
15 Jun 16
4.75
21900
1.93
-0.01
0.03
2.01
1.99
15 Feb 17
6.00
21096
1.91
-0.06
0.03
1.96
1.89
21 Jul 17
4.25
18900
1.87
-0.13
0.00
1.99
1.85
21 Jan 18
21 Oct 18
5.50
3.25
20500
13500
1.86
1.90
-0.16
-0.16
-0.01
-0.05
2.01
2.05
1.82
1.79
15 Mar 19
5.25
21447
1.93
-0.17
-0.02
2.05
1.79
21 Oct 19
2.75
11700
2.02
-0.19
-0.02
2.15
1.86
15 Apr 20
4.50
20397
2.07
-0.22
-0.03
2.26
1.96
21 Nov 20
1.75
5000
2.20
-0.23
-0.02
2.34
2.02
15 May 21
5.75
22299
2.25
-0.22
-0.03
2.50
2.17
15 Jul 22
5.75
18200
2.43
-0.24
-0.01
2.54
2.21
21 Apr 23
5.50
21300
2.54
-0.24
0.01
2.75
2.40
21 Apr 24
2.75
22900
2.67
-0.25
0.02
2.87
2.52
21 Apr 25
3.25
18900
2.76
-0.25
0.03
3.01
2.65
21 Apr 26
4.25
16900
2.84
-0.24
0.05
3.11
2.75
21 Apr 27
4.75
15100
2.91
-0.23
0.06
3.19
2.82
21 Apr 29
3.25
9700
3.07
-0.23
0.07
3.24
2.88
21 Apr 33
4.50
9800
3.22
-0.25
0.09
3.41
3.05
-0.25
0.07
3.58
3.22
-0.25
0.07
3.71
3.34
The
by S&P and Aaa by3.34
Moody’s
21Australian
Jun 35 Government
2.75is rated AAA4250
21 Apr 37
3.75
7500
3.37
ASX LISTED AUST GOVT BONDS
MATURITY
COUPON (%) ISSUE SIZE ($M)
MONTHLY T/OVER
$ Value
ASX Code
21 Oct 15
4.75
11399
266531
GSBS15
15 Jun 16
15 Feb 17
4.75
6.00
21900
21096
158713
273711
GSBK16
GSBC17
21 Jul 17
4.25
18900
59799
GSBM17
21 Jan 18
5.50
20500
564860
GSBA18
21 Oct 18
3.25
13500
27673
GSBS18
15 Mar 19
5.25
21447
43009
GSBE19
21 Oct 19
2.75
11700
14952
GSBS19
15 Apr 20
1.75
20397
99171
GSBU20
21 Nov 20
4.50
5000
100175
GSBG20
15 May 21
5.75
22299
70929
GSBI21
15 Jul 22
5.75
18200
66712
GSBM22
21 Apr 23
5.50
21300
4025
GSBG23
21 Apr 24
2.75
22900
53901
GSBG24
21 Apr 25
3.25
18900
1744
GSBG25
21 Apr 26
4.75
16900
22234
GSBG26
21 Apr 27
4.75
15100
0
GSBG27
21 Apr 29
3.25
9700
211583
GSBG29
21 Apr 33
4.50
9800
0
GSBG33
21 Jun 35
2.75
4250
0
GSBG35
21 Apr 37
4.50
7500
60468
GSBG37
22
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JULY 2015
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AUST SEMI GOVT BONDS
ISSUER
Issues underlined are guaranteed by the Commonwealth Government
MONTH HIGH MONTH LOW
CLOSING YIELD
Δ MONTH Δ 2 MONTH
MATURITY
COUPON (%)
ISSUE SIZE
QTC
14 Oct 15
6.00
523
2.06
2.04
2.08
0.04
0.09
NTTC
20 Oct 15
6.25
500
2.08
2.03
2.19
0.04
0.08
QTC
21 Oct 15
6.00
4869
2.19
2.14
2.15
0.03
0.06
TCV
10 Nov 15
2.75
1254
2.15
2.10
2.06
0.03
0.04
NSWTC
01 Apr 16
6.00
4011
2.06
2.02
2.02
-0.02
0.03
QTC
21 Apr 16
6.00
5293
2.05
1.99
2.08
-0.06
0.05
WATC
08 Jun 16
3.00
3081
2.15
2.08
2.06
-0.08
0.01
TCV
15 Nov 16
5.75
2880
2.15
2.06
2.00
-0.03
0.00
NTTC
20 Nov 16
5.75
500
2.05
1.99
2.13
-0.07
0.04
NSWTC
20 Feb 17
4.00
4007
2.21
2.13
2.01
-0.07
0.03
NSWTC
01 Mar 17
5.50
860
2.08
1.97
1.94
-0.05
0.03
WATC
15 Jul 17
8.00
5656
2.02
1.90
2.09
-0.19
0.00
QTC
14 Sep 17
6.00
1457
2.26
2.07
1.99
-0.16
0.01
SAFA
20 Sep 17
5.75
2403
2.16
1.96
2.10
-0.17
-0.01
TASCORP
20 Sep 17
5.00
980
2.26
2.08
2.12
-0.16
0.00
QTC
21 Sep 17
3.50
6663
2.29
2.09
2.11
-0.17
0.00
NTTC
17 Nov 17
4.75
500
2.28
2.08
2.13
-0.18
0.01
TCV
17 Nov 17
3.50
2891
2.31
2.11
2.06
-0.15
0.02
NSWTC
01 Feb 18
6.00
5397
2.20
2.03
2.03
-0.17
-0.01
QTC
21 Feb 18
6.00
6552
2.22
1.99
2.14
-0.21
-0.01
ACTTREAS
NTTC
07 Jun 18
20 Sep 18
5.50
4.75
550
500
2.35
2.34
2.10
2.08
2.13
2.24
-0.17
-0.17
-0.01
0.00
WATC
23 Oct 18
3.75
4092
2.44
2.19
2.25
-0.23
-0.03
TCV
NSWTC
15 Nov 18
20 Mar 19
5.50
3.50
4176
4768
2.48
2.34
2.21
2.11
2.15
2.18
-0.18
-0.20
0.03
-0.01
NSWTC
01 Apr 19
6.00
995
2.39
2.13
2.10
-0.20
0.00
QTC
QTC
SAFA
WATC
QTC
NSWTC
ACTTREAS
NSWTC
TASCORP
TCV
NSWTC
SAFA
QTC
QTC
WATC
NTTC
14 Jun 19
21 Jun 19
06 Aug 19
15 Oct 19
21 Feb 20
01 May 20
22 May 20
01 Jun 20
15 Jun 20
15 Jun 20
08 Apr 21
20 May 21
14 Jun 21
21 Jun 21
15 Jul 21
20 Sep 21
6.25
4.00
4.75
7.00
6.25
6.00
4.25
6.00
6.00
6.00
4.00
5.00
5.50
6.00
7.00
4.25
3279
5544
2000
3664
9686
6159
570
194
654
6226
3020
2045
1714
6506
3749
650
2.31
2.43
2.60
2.63
2.67
2.73
2.58
2.70
2.40
2.75
2.62
2.78
3.00
2.81
2.99
3.04
2.05
2.11
2.28
2.31
2.34
2.39
2.29
2.40
2.12
2.42
2.33
2.48
2.62
2.44
2.63
2.67
2.14
2.32
2.34
2.38
2.43
2.33
2.44
2.17
2.47
2.37
2.51
2.65
2.48
2.66
2.70
2.27
-0.28
-0.26
-0.27
-0.28
-0.26
-0.22
-0.22
-0.22
-0.25
-0.21
-0.23
-0.32
-0.30
-0.30
-0.30
-0.22
-0.05
-0.03
-0.01
-0.05
-0.05
-0.03
-0.02
-0.08
-0.02
0.00
-0.04
-0.08
-0.09
-0.09
-0.11
-0.56
23
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AUST SEMI GOVT BONDS
ISSUER
NSWTC
TASCORP
ACTTREAS
QTC
TCV
NSWTC
NSWTC
QTC
WATC
SAFA
NTTC
QTC
NSWTC
TCV
QTC
WATC
NTTC
TCV
NSWTC
TCV
QTC
MATURITY
COUPON (%)
ISSUE SIZE ($m)
01 Mar 22
08 Mar 22
11 Apr 22
21 Jul 22
17 Oct 22
20 Apr 23
01 May 23
21 Jul 23
16 Oct 23
20 Nov 23
15 Mar 24
22 Jul 24
20 Aug 24
17 Dec 24
21 Jul 25
23 Jul 25
15 Mar 26
17 Nov 26
01 May 30
20 Dec 32
14 Mar 33
6.00
4.25
4.25
6.00
6.00
4.00
6.00
4.25
6.00
4.25
6.00
5.75
5.00
5.50
4.75
5.00
6.00
5.50
6.00
4.25
6.50
6089
598
550
7558
6069
4324
1321
6317
2867
1270
650
7885
6394
4867
3460
1741
650
3559
349
332
840
MONTH HIGH MONTH LOW CLOSING YIELD Δ MONTH Δ 2 MONTH
2.54
2.93
3.17
3.10
3.20
3.01
3.14
3.01
3.41
3.48
3.47
3.54
3.56
3.28
3.31
3.68
3.74
3.72
3.50
3.73
3.91
2.25
2.59
2.81
2.76
2.80
2.67
2.80
2.68
3.02
3.04
3.05
3.08
3.12
2.92
2.94
3.23
3.27
3.28
3.14
3.37
3.57
2.63
2.82
2.79
2.83
2.71
2.81
2.69
3.02
3.05
3.05
3.08
3.12
2.93
2.95
3.23
3.27
3.28
3.14
3.37
3.57
3.72
-0.24
-0.30
-0.23
-0.32
-0.25
-0.26
-0.25
-0.34
-0.37
-0.36
-0.39
-0.38
-0.28
-0.29
-0.39
-0.40
-0.37
-0.29
-0.29
-0.25
-0.36
-0.04
-0.05
-0.03
-0.08
-0.01
-0.03
-0.04
-0.08
-0.12
-0.07
-0.11
-0.09
-0.03
-0.02
-0.11
-0.12
-0.09
-0.01
0.02
0.08
0.01
Issues underlined are guaranteed by the Commonwealth Government
AUST SEMI GOVT BONDS - FLOATING RATE NOTES
MATURITY
NSWTC
NSWTC
SAFA
WATC
QTC
QTC
WATC
WATC
WATC
NSWTC
QTC
SAFA
WATC
SAFA
NSWTC
24 Aug 15
08 Apr 16
20 May 16
25 Jun 16
19 Sep 16
06 Mar 17
27 Mar 17
12 Dec 17
21 May 18
20 Sep 18
19 Nov 18
10 Dec 18
19 Nov 19
24 Feb 20
08 Oct 20
ISSUE SIZE ($m) TRADING MARGIN (bps) COUPON MARGIN (bps) NEXT PAYMENT DATE RESET RATE SWAP RATE
250
2500
2000
1970
2575
2380
1204
650
1480
1250
850
2000
1499
2000
1900
0.0
-3.0
2.0
3.0
-1.0
0.0
4.0
4.5
6.0
-3.0
2.8
4.0
7.0
6.0
-2.0
-10.0
8.0
20.0
3.0
8.0
9.0
8.0
12.0
11.0
3.0
6.0
7.5
21.0
20.0
0.0
24/08/15
08/10/15
22/08/15
25/09/15
21/09/15
07/09/15
28/09/15
14/09/15
21/08/15
21/09/15
19/08/15
10/09/15
19/08/15
24/08/15
08/10/15
2.153
2.142
2.153
2.145
2.147
2.152
2.145
2.150
2.153
2.147
2.154
2.151
2.154
2.153
2.142
2.140
2.079
2.074
2.063
2.046
2.054
2.058
2.112
2.153
2.201
2.240
2.254
2.454
2.493
2.586
FRNs pay quarterly interest with the rate reset each quarterly payment date.
24
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AUST CORPORATE BONDS
ISSUER
MATURITY
COUPON (%)
RATING
ISSUE SIZE
($m)
MONTH
HIGH
MONTH
LOW
CLOSING
YIELD
Δ MONTH
Δ 2 MONTH
ANZ
Westpac
Transurban
Stockland
Fonterra
Telstra
Melb Airport
Mirvac Finance
Wesfarmers
Westpac
Suncorp (CB)
CBA (CB)
Aust Post
Westpac (CB)
NAB
Westpac
Crown
BP Cap
BHP
Telstra
HSBC
Westpac
CBA
NAB
ANZ
NAB
Syd Airport
ANZ
Lendlease
Telstra
Westpac
Woolworths
Wesfarmers
CBA
Bris Airport
Stockland
DBNGP
Westfield Retail
CFS Retail
CBA
Westpac
Wesfarmers
Qantas
Lendlease
Melb Airport
Telstra
Perth Airport
Mirvac Fin
Bris Airport
Aust Post
Stockland
Uni Sydney
09 May 16
09 May 16
08 Jun 16
01 Jul 16
11 Jul 16
02 Aug 16
25 Aug 16
16 Sep 16
04 Nov 16
18 Nov 16
06 Dec 16
25 Jan 17
06 Feb 17
06 Feb 17
15 Feb 17
20 Feb 17
18 Jul 17
05 Sep 17
18 Oct 17
15 Nov 17
16 Nov 17
24 Jan 18
25 Jan 18
07 Mar 18
17 Apr 18
23 May 18
06 Jul 18
06 Nov 18
13 Nov 18
13 Nov 18
25 Feb 19
21 Mar 19
28 Mar 19
24 Apr 19
09 Jul 19
06 Sep 19
11 Oct 19
23 Oct 19
19 Dec 19
05 Feb 20
11 Feb 20
12 Mar 20
27 Apr 20
13 May 20
04 Jun 20
15 Jul 20
23 Jul 20
18 Sep 20
21 Oct 20
13 Nov 20
25 Nov 20
16 Apr 21
6.75
6.75
6.75
7.50
6.25
7.00
7.00
8.00
6.00
7.25
4.75
5.75
5.50
5.75
6.00
6.00
5.75
4.50
3.75
4.00
4.25
4.25
4.25
7.25
4.25
4.00
7.75
4.50
5.50
4.50
4.50
6.00
6.25
4.25
8.00
5.50
6.00
5.00
5.00
7.25
7.25
4.75
6.50
6.00
5.00
7.75
6.00
5.75
6.00
5.00
8.25
4.75
AAAAAAA+
A
ABBB+
AAAn/a
n/a
AA
n/a
AAAABBB
A
A+
A
AAAAAAAAAAAABBB
AABBBA
AAAAAABBB
ABBBA
A
AAAAABB+
BBBAA
BBB
BBB+
BBB
AA
An/a
775
625
200
0
0
0
0
0
500
1695
1100
2000
0
1700
1300
725
300
0
1000
750
250
250
750
700
250
325
0
300
250
500
1100
500
500
500
200
150
0
0
0
250
390
350
250
225
225
500
0
200
350
0
160
200
2.41
2.41
3.20
3.00
2.77
2.54
3.01
3.15
2.71
2.51
2.60
2.47
2.80
2.48
2.56
2.55
3.57
3.10
3.10
2.83
2.87
2.83
2.83
2.85
2.90
2.93
3.52
3.07
4.04
3.04
3.15
3.51
3.31
3.20
3.68
3.76
4.29
3.76
3.61
3.42
3.41
3.55
5.19
4.40
3.77
3.43
4.00
4.05
4.00
3.51
4.04
3.46
2.32
2.32
3.13
2.92
2.70
2.44
2.93
3.06
2.61
2.38
2.48
2.35
2.69
2.36
2.42
2.40
3.40
2.94
2.89
2.68
2.71
2.60
2.61
2.62
2.65
2.69
3.30
2.77
3.86
2.83
2.84
3.32
3.08
2.90
3.45
3.53
4.05
3.51
3.38
3.09
3.08
3.29
4.91
4.18
3.50
3.18
3.72
3.78
3.73
3.24
3.79
3.12
2.33
2.34
3.16
2.95
2.73
2.47
2.96
3.09
2.63
2.42
2.51
2.39
2.72
2.40
2.45
2.43
3.43
2.98
2.92
2.72
2.76
2.63
2.64
2.65
2.69
2.72
3.33
2.79
3.90
2.85
2.86
3.37
3.11
2.91
3.47
3.57
4.07
3.55
3.40
3.10
3.10
3.33
5.03
4.21
3.52
3.20
3.75
3.81
3.78
3.25
3.81
3.12
-0.05
-0.04
-0.04
-0.04
-0.04
-0.06
-0.04
-0.06
-0.07
-0.07
-0.07
-0.07
-0.06
-0.07
-0.10
-0.11
-0.11
-0.11
-0.10
-0.07
-0.10
-0.19
-0.18
-0.18
-0.19
-0.19
-0.15
-0.23
-0.08
-0.14
-0.24
-0.02
-0.14
-0.24
-0.16
-0.14
-0.17
-0.15
-0.16
-0.27
-0.28
-0.16
-0.10
-0.11
-0.19
-0.16
-0.19
-0.17
-0.15
-0.20
-0.17
-0.27
0.03
0.03
0.04
0.07
0.07
0.05
0.03
0.04
0.07
0.03
0.03
0.04
0.06
0.04
0.03
0.01
0.06
0.09
0.14
0.12
0.05
0.02
0.04
0.01
0.01
0.02
0.01
-0.02
0.17
0.10
0.01
0.29
0.11
0.01
0.04
0.08
0.05
0.07
0.05
0.04
0.03
0.11
0.29
0.17
0.04
0.12
0.09
0.08
0.10
0.07
0.09
0.01
25
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MONTHLY REVIEW
JULY 2015
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ASX LISTED FLOATING RATE NOTES
COMPANY
$100 Face Val
CODE
BOND
TYPE
MATURITY
ISSUE
MARGIN
TRADING
MARGIN
∆ Month
MONTH
CLOSE
YTM Est**
S&P RATING
Comp/Hybrid
AGL
AGKHA
Sub Note
08 Jun 19
3.80%
2.74%
0.13%
104.50
4.88%
BBB/BB
ANZ
ANZHA
Sub Note
14 Jun 17
2.75%
1.97%
n/a
102.65
4.11%
AA-/A-
APT Pipelines
AQHHA
Sub Note
31 Mar 18
4.50%
1.36%
-0.35%
103.00
3.50%
BBB/BB+
Australian Unity
AYUHA
Bond
14 Apr 16
3.55%
1.73%
-1.23%
107.49
3.87%
BBB/BBB
CBA Bond
CBAHA
Snr. Bond
24 Dec 15
1.05%
2.13%
0.72%
101.20
4.27%
AA-/AA-
Colonial
CNGHA
Sub Note
31 Mar 17
3.25%
0.74%
0.47%
100.22
2.88%
A+/BBB+
Caltex
CTXHA
Sub Note
15 Sep 17
4.50%
2.32%
-0.29%
101.90
4.46%
BBB+/BBB-
Crown
CWNHA
Sub Note
14 Sep 18
5.00%
2.56%
0.12%
104.70
4.70%
BBB/BB+
Goodman Group
GMPPA
Sub Note
30 Sep 18
3.90%
3.67%
-0.37%
104.65
5.81%
BBB/BBB-
Bentham IMF
IMFHA
Bond
30 Jun 19
4.20%
3.20%
-0.42%
102.50
5.34%
Unrated
MYOB
MYBG
Sub Note
20 Dec 17
6.70%
3.59%
0.70%
102.50
5.73%
B+/B-
Nat Aust Bank
NABHB
Sub Note
18 Jun 17
2.75%
1.43%
-0.09%
102.91
3.57%
AA-/A-
Origin
ORGHA
Sub Note
22 Dec 16
4.00%
3.81%
-0.25%
100.88
5.95%
BBB/BB
Primary Hth Care
PRYHA
Snr. Bond
28 Sep 15
4.00%
2.76%
-0.77%
100.70
4.90%
BBB-/BB+
Suncorp Metway
SUNPD
Sub Note II
21 Nov 18
2.85%
2.01%
-0.21%
103.50
4.15%
A /BBB+
Tabcorp
TAHHB
Sub Bond
22 Mar 17
4.00%
2.93%
-0.20%
102.30
5.07%
BBB-/BB+
Tatts
TTSHA
Snr. Bond
05 Jul 19
3.10%
1.67%
-0.03%
105.50
3.81%
BBB+/BBB+
Westpac
WBCHA
Sub Note
23 Aug 17
2.75%
1.44%
-0.15%
103.45
3.58%
AA-/A-
Westpac
WBCHB
Sub Note II
22 Aug 18
2.30%
1.94%
-0.09%
101.85
4.08%
AA-/A-
Woolworths
WOWHC
Sub Note
24 Nov 16
3.25%
1.40%
-0.67%
103.30
3.54%
A-/BBB
ASX LISTED CONVERTIBLE NOTES
COMPANY
Aust Foundation
Peet Group
CODE
FACE VALUE
MATURITY
MONTH HIGH
MONTH LOW
MONTH CLOSE
YTM
SIZE ($m)
AFIG
PPCG
$100.00
$100.00
28 Feb 17
16 Jun 16
119.00
104.00
115.60
102.50
117.50
103.50
14.02%
6.61%
223
40
** YTM for floating rate securities is an estimate using current interest rates. This will vary if rates change.
Source: Evans & Partners.
ASX LISTED FIXED RATE BONDS
COMPANY
Heritage BS
CODE
TYPE
MATURITY
HBSHB Sub. Bond 20 Jun 17
COUPON MNT HIGH MTH LOW MTH CLOSE
7.25%
107.25
106.00
106.50
YTM
NEXT DIV AND EX DATE
4.05% $1.813 10 Sep 2015(E)
S&P RATING
BBB+/BBB+
** YTM for floating rate securities is an estimate using current interest rates. This will vary if rates change.
Source: Evans & Partners.
26
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ASX LISTED HYBRIDS
COMPANY
CODE
HYBRID
TYPE
MATURITY OR MARGIN TRADING
∆ Month
STEP-UP DATE INC FRANK MARGIN
MONTH
CLOSE
YTM
Est**
S&P CREDIT
RATING
COMP/HYBRID
MCPS I
16/12/2016
3.10%
3.24%
0.39%
100.45
5.38%
AA-/BBB
MCPS II
28/09/2017
MCPS II
1/09/2021
Capital Note 24/03/2022
3.10%
3.40%
3.25%
3.92%
4.13%
4.21%
0.00%
-0.04%
-0.16%
100.60
98.70
96.85
6.16%
6.37%
6.45%
AA-/BBB+
AA-/BBB+
AA-/
ANZ Banking Group
ANZPA
ANZ Banking Group
ANZ Banking Group
ANZ Banking Group
ANZPC
ANZPD
ANZPE
Bendigo Bank
BENHB
Perpetual
21/10/2054
1.00%
2.71%
0.04%
74.03
4.85%
A-/BBB
Bendigo Bank
BENPD
MCPS II
13/12/2017
5.00%
3.72%
-0.30%
103.68
5.96%
A-/BBB-
Bendigo Bank
BENPE
MCPS II
30/11/2020
3.20%
4.14%
-0.27%
96.70
6.38%
/BBB-
Bendigo Bank
BENPF
MCPS II
15/06/2021
4.00%
4.18%
n/a
99.90
6.42%
/BBB-
Bank Of Queensland
BOQPD
MCPS II
15/04/2018
5.10%
3.53%
-0.17%
106.00
5.77%
BBB+/BB+
CBA PERLS 3
PCAPA
Step Up
6/04/2016
1.05%
3.13%
0.29%
197.60
5.27%
AA-/BBB
CBA PERLS 6
CBAPC
MCPS II
15/12/2018
3.80%
3.67%
-0.17%
101.11
5.81%
AA-/BBB-
CBA PERLS 7
CBAPD
MCPS II
15/12/2022
2.80%
4.08%
-0.38%
93.25
6.22%
AA-/BBB-
Challenger
CGFPA
Capital Note 25/05/2020
3.40%
4.18%
-0.62%
97.80
6.32%
-/-
Elders
IAG
IAG RES
Macquarie Bank
ELDPA
IAGPC
IANG
MBLHB
Perp'l Pref
MCPS II
Reset pref
Income Sec
30/06/2051
1/05/2017
16/12/2019
Perpetual
N/A
4.00%
4.00%
1.70%
0.00%
3.70%
3.28%
3.50%
0.00%
0.08%
0.03%
-0.37%
75.00
102.00
103.50
74.90
0.00%
5.94%
5.42%
5.64%
N/A
A+/AA+/BBB+
A/BB+
Macquarie
MBLPA
Capital Note 24/03/2021
3.30%
4.10%
0.07%
98.20
6.34%
A/-
Macquarie
MQGPA
Capital Note
7/06/2019
4.00%
3.86%
0.16%
100.98
6.10%
A-/BBB-
Multiplex SITES
MXUPA
Perp'l Pref
Perpetual
3.90%
5.32%
-0.09%
84.01
7.46%
BB+/BB
Nat Aust Bank
NABHA
Income Sec
Perpetual
1.25%
3.01%
-0.31%
73.46
5.15%
AA-/BBB
Nat Aust Bank
NABPA
MCPS II
20/03/2019
3.20%
3.91%
-0.27%
98.25
6.05%
AA-/BBB-
Nat Aust Bank
NABPB
MCPS II
17/12/2020
3.25%
4.03%
-0.15%
97.10
6.17%
AA-/BBB-
Nufarm
Paperlinx
Ramsay Health Care
Suncorp-Metway
Suncorp
NFNG
PXUPA
RHCPA
SBKHB
SUNPC
Step Up
Perp'l Pref
Perp'l Pref
Income Sec
MCPS II
Perpetual
30/06/2052
Perpetual
Perpetual
17/12/2017
3.90%
N/A
4.85%
0.75%
4.65%
5.41%
8.80%
4.70%
2.21%
3.09%
-0.05%
0.00%
-0.04%
-0.06%
-0.89%
84.62
7.50
103.72
76.36
104.25
7.65%
11.04%
6.94%
4.35%
5.23%
BB /B+
N/A
BBB/BB+
A+/AA /BBB+
Suncorp
SUNPE
Seven Network TELYS 4 SVWPA
Westpac
WBCPC
Westpac
WBCPD
Westpac
WBCPE
Westpac
WCTPA
MCPS II
17/06/2020
3.40%
3.89%
-0.36%
98.60
6.03%
A /BBB+
Perp'l Pref
MCPS II
MCPS II
MCPS II
2/12/2054
31/03/2018
8/03/2019
22/09/2022
4.75%
3.25%
3.20%
3.05%
7.37%
3.73%
3.94%
4.09%
0.04%
-0.05%
-0.09%
0.07%
76.50
100.64
98.35
94.69
9.61%
5.97%
6.08%
6.23%
BB+/BBAA-/BBBAA-/BBBAA-/BBB+
Step Up
30/06/2016
1.00%
2.72%
-0.36%
98.70
4.86%
AA-/BBB
** YTM for floating rate securities is an estimate using current interest rates. This will vary if rates change.
Source: Evans & Partners.
27
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MONTHLY REVIEW
JULY 2015
Home Page
MANAGED FUNDS (to June 2015)
AUSTRALIAN CASH FUNDS
1m (%)
3m (%)
1y (%)
3y (%)
5y (%)
Adelaide Cash Management Trust
BT Premium Cash
CFS Cash Management Trust
0.12
0.15
0.10
0.41
0.51
0.34
1.89
2.30
1.66
2.20
n/a
2.00
2.93
n/a
2.72
CFS Premier Cash Management Trust
0.15
0.48
2.11
2.44
3.19
EQT Cash Management
0.12
0.41
1.83
1.93
2.63
IOOF Cash Management Trust
0.20
0.62
2.74
3.06
3.79
Perpetual Cash Management
0.10
0.33
1.58
1.88
2.63
Sandhurst Cash Common Fund
UBS Cash Fund
0.12
0.16
0.42
0.52
1.90
2.48
2.13
2.81
2.87
3.54
1m (%)
3m (%)
1y (%)
3y (%)
5y (%)
AMP Capital Managed Treasury
Australian Ethical Cash Trust
BT WE BT Enhanced Cash
0.17
0.10
0.09
0.56
0.41
0.42
2.60
2.23
2.32
3.06
3.35
3.26
3.86
3.98
4.12
BT Wholesale Enhanced Cash
0.13
0.56
2.88
3.84
4.75
Dimensional Short Term Fixed Interest
0.15
0.50
2.50
2.84
3.80
Fiducian Capital Safe
0.25
0.60
2.39
3.11
3.89
IOOF MultiMix Cash Enhanced Trust
0.22
0.77
2.81
3.91
4.63
Legg Mason Western Asset Cash Plus A
MIF
0.19
-0.17
0.74
0.34
2.65
3.23
3.95
n/a
4.67
n/a
MLC Wholesale Horizon 1 Bond Portfolio
0.06
0.42
2.51
3.21
4.01
Millinium’s Investment Cash
0.33
0.97
4.48
4.88
5.28
Perennial Cash Enhanced Trust
0.22
0.87
2.86
4.23
4.90
Perpetual High Grade Treasury
0.15
0.72
3.60
4.84
5.56
Sandhurst Strategic Income A
0.13
0.52
3.00
4.18
0.00
Smarter Money Active Cash Fund
-0.06
0.40
3.22
4.90
UBS Cash Plus
0.17
0.66
2.93
3.37
UCA Cash Portfolio
0.29
0.89
3.86
4.41
Vanguard® Cash Reserve Fund
0.17
0.52
2.47
2.70
3.47
Vanguard® Cash Plus Fund
0.12
0.42
2.63
2.79
3.69
Bloomberg Bank Bill Index
0.18
0.56
2.60
2.85
3.65
AUSTRALIAN ENHANCED CASH FUNDS
4.28
Return in AUD after fees
Underlined Funds can be applied for and redeemed via the ASX mFund platform
28
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MONTHLY REVIEW
JULY 2015
Home Page
MANAGED FUNDS (to June 2015)
AUSTRALIAN FIXED INTEREST
1m (%)
3m (%)
1y (%)
3y (%)
5y (%)
Aberdeen Australian Fixed Income
Advance Aus Fixed Intr Multi-Blend
AMP Capital Corporate Bond
Alpha Enhanced Yield
AMP FLI S2-AMP Australian Bond
AMP Gen-BlackRock Aust Fixed Int Ind
Antares Prof Premier Fixed Income
Altius Bond
BT Enhanced Credit WS
BT Fixed Interest Retail
BT Fixed Interest WS
BT Government Bond
BT-Schroder Credit Fund
CFS FC Inv-Aberdeen Aus Fixed Inc
CFS FC W Inv-CFS W Australian Bond
DDH Fixed Interest
Jamieson Coote Bonds Active
Legg Mason Western Asset Australian Bond Trust A
Macquarie Australian Fixed Interest
Macquarie Core Plus Australian Fxd Intr
Mercer Australian Sovereign Bond Fund
Millinium Fixed Income
Nikko AM Australian Bond
OnePath OA FR IP-Optimix Aus Fixed Int
Perennial Australian Fixed Interest Tr
Perennial Fixed Interest Wholesale
Perennial Tactical Income Trust
Perpetual WFIA-Schroder Fixed Income
Perpetual WFIA-Vanguard Aust FI Idx
PIMCO EQT Australian Bond
PIMCO EQT Wholesale Diversified Fixed Interest B
-1.01
-1.09
-0.09
-1.35
-1.06
-0.99
-1.17
-0.42
-0.69
-1.52
-1.64
-1.77
n/a
-1.12
-0.42
-0.92
-0.38
-0.95
-1.05
-1.33
-1.26
-0.16
-0.75
-0.93
-0.73
-0.74
-0.15
-0.82
-0.99
-1.10
n/a
-2.00
-2.27
0.31
-2.86
-2.14
-2.22
-2.32
-0.84
-1.06
-3.22
-3.33
-3.71
n/a
-2.32
-0.69
-2.02
0.04
-1.90
-2.19
-2.80
-2.96
0.16
-2.05
-1.97
-1.37
-1.39
0.16
-2.04
-2.23
-2.17
n/a
5.13
3.38
4.11
-0.27
4.02
4.41
5.00
2.92
5.19
3.68
6.02
4.87
1.69
3.96
4.52
5.17
4.71
3.70
6.41
4.31
4.73
3.62
4.83
4.37
5.72
3.24
4.67
3.85
4.21
3.48
4.68
5.31
6.26
4.71
7.34
4.23
0.00
5.23
6.43
0.00
6.85
5.01
6.34
6.00
4.96
5.14
5.55
6.62
5.55
5.04
4.39
5.61
8.57
5.36
4.57
4.92
4.81
2.79
2.87
4.30
5.38
n/a
5.89
5.54
5.41
3.89
12.24
5.04
4.51
5.79
5.66
5.13
3.61
3.52
4.64
n/a
7.32
6.94
6.96
5.81
n/a
6.40
0.00
6.81
6.78
5.69
5.11
5.11
6.47
n/a
PIMCO EQT Wholesale Global Bond B
SSgA Australian Fixed Income
UBS Australian Bond
Vanguard Australian Fixed Interest Index
Vanguard Australian Govt Bond Index
Bloomberg AusBond Composite 0+Y TR AUD
n/a
-0.93
-0.95
-0.91
-1.01
-0.93
n/a
-2.08
-2.05
-2.02
-2.38
-1.99
n/a
5.47
4.54
5.43
5.60
5.63
n/a
4.54
4.72
4.62
4.20
4.82
n/a
6.10
6.19
6.25
6.08
6.44
Returns in AUD after fees.
29
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MONTHLY REVIEW
JULY 2015
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MANAGED GLOBAL BOND FUNDS (to June 2015)
GLOBAL BOND FUNDS
1m (%)
3m (%)
1y (%)
-1.31
-1.07
-1.02
-2.27
-1.63
-1.50
3.28
4.02
4.56
4.97
5.20
5.78
6.01
5.99
6.46
-0.25
0.40
1.13
5.20
5.18
0.02
1.50
3.45
10.54
-0.97
1.12
3.96
11.93
-0.12
1.89
5.38
9.81
-0.27
0.45
2.60
9.89
8.75
-1.29
-2.15
4.78
6.33
7.05
6
-1.85
-3.59
6.67
5.44
6.18
7
BT Institutional Enhanced Gbl Fixed Int16
-1.81
-3.53
6.87
5.62
6.95
CFS Wholesale Global Bond15
-1.02
-2.32
4.73
5.22
5.81
-1.33
-1.63
4.07
7.75
9.30
DDH Global Fixed Interest Alpha17
0.66
1.58
-1.05
4.30
2.44
Dimensional Five-Year Diversified F/I
-0.34
-0.02
4.33
4.44
6.03
Dimensional Global Bond Trust4
-1.25
-1.74
5.77
5.63
0.00
Dimensional Two-Year Diversified F/I
0.14
0.49
2.84
3.18
4.07
-1.34
-1.65
3.83
0.00
0.00
Aberdeen Global Government Bond
Advance Int Fix Intr Multi-Blend4
AMP Capital FD Intl Bond A3
16
AMP Capital International Bond4
ANZ OA IP-CFS Global Credit Income EF
Bentham W/S Global Income
17
1
Bentham W/S High Yield21
BlackRock Monthly Income C
17
BlackRock WS International Bond7
BT Global Fixed Interest WS
16
CFS Wholesale Global Corporate Bond
Fidelity Global Strategic Bond
4
4
Franklin Templeton Global Aggregate Bd W
4
3y (%) 5y (%)
BENCHMARKS
1
2
3
4
5
8
9
10
11
12
13
14
15
-1.45
-3.24
6.91
0.00
0.00
Franklin Templeton Multisector Bond I11
-1.34
-0.05
-0.08
8.61
10.22
GAM Absolute Return Bond (AU)12
0.47
2.41
-0.56
3.43
5.69
Legg Mason Brandywine Glbl Opp Fix Inc A15
-2.49
-3.93
7.34
9.42
0.00
Legg Mason Brandywine Global Fixed Inc A15
-2.33
-3.76
8.91
9.21
10.19
20
Legg Mason WA Glb Multi Str Bd A
-1.78
-0.83
4.01
6.20
7.72
21
-1.70
-3.66
5.93
5.15
6.44
-0.11
0.39
2.39
5.13
5.43
-1.28
-1.71
4.39
7.16
8.70
-1.43
-2.89
7.89
6.51
7.23
-1.18
-2.41
5.38
5.90
6.21
-1.01
-0.99
3.91
5.46
6.96
-1.24
-2.27
5.89
6.56
8.22
-1.35
-1.53
4.99
6.13
7.64
-1.10
-1.77
4.91
5.32
6.71
-1.15
-2.24
3.49
4.90
3.85
0.12
2.71
4.86
0.00
0.00
Macquarie Global Bond
13**
Macquarie Global Income Opportunities Fd
Mercer Global Credit Fund2
Mercer Global Sovereign Bond Fund
16
Nikko AM International Bond16
Omega Global Corporate Bond
17
Omega Global Government Bond
17
SSgA Global Broad Invest Grade Fixed Inc
SSgA Global Fixed Income
14
15
T.Rowe Price Dynamic Global Bond Fund17
Templeton Global Bond Plus W
UBS Global Credit Fund
16
-1.36
-0.23
0.76
6.07
7.78
4
-1.62
-2.26
3.97
6.79
8.11
7
-1.21
-2.04
5.10
5.55
6.76
-1.31
-1.95
4.27
5.89
7.35
-1.04
-2.04
6.04
5.66
6.76
UBS International Bond
17
18
19
BarCap Gl Aggregate TR ($AUD hedged)
Barclays Capital Global Aggregate Bond Index ($AUD
Hedged)
Barclays Capital World Government Inflation-Linked
Bond Index ($AUD hedged)
Barclays Glb Agg Corp ($AUD hedged)
Barclays Global Aggregate 500 Index ($AUD hedged)
Barclays Global Aggregate Government-Related and
Corporate ($AUD hedged)
Barclays Global Aggregate Index ($AUD hedged)
Barclays Global Treasury Index ($AUD hedged)
Barclays Multiverse Index is the primary benchmark
Cash Index: AFMA 3-month bank bill swap rate BBSW
(Hurdle)
Citigroup (Customised Benchmark) M1 Global exAustralia hedged to Australian dollars Index
Citigroup World Broad Investment Grade ex-Australia
Index ($AUD hedged)
Citigroup World Government Bond Index ex Australia
($AUD hedged)
JP Morgan Global Government Bond Index ($AUD
hedged)
BB AusBond Australia Bank Bill Index
Credit Suisse Leverage Loan Index ($AUD hedged)
Consumer Price Index increases by at least 0.5%
BB AusBond Composite Bond Index
Merrill Lynch High Yield Cash Pay Constrained ($AUD
hedged)
Returns in AUD after fees. Underlined Funds
can be applied for and redeemed via the ASX
mFund platform
16
PIMCO EQT Wholesale Global Credit B20
Putnam Worldwide Income Fund
17
16
50% BB AusBond Composite Bond Index /50% BB
AusBond Bank Bill Index
60% Barclays Global Aggregate - Corporate Index in
$A (Hedged) and 40% Barclays Capital Global
Aggregate ex Government ex Treasuries Index ($AUD
hedged)
Vanguard International Crdt Secs Idx Hdg8
Vanguard International Fxd Intr Idx Hdg
10
30
MONTHLY REVIEW
JULY 2015
Home Page
ASX CASH & BOND ETFs*
NAME
SYMBOL
CLOSE PRICE
1m (%)
1y (%)
MER (%)
FUND SIZE ($m)
BetaShares Aust High Int Cash
AAA
50.19
0.23
3.1
0.18
771.63
SPDR S&P/ASX Aust Bond
SPDR S&P/ASX Aust Govt Bond
iShares Composite Bond ETF
BOND
GOVT
IAF
26.03
25.8
106.05
-1.05
-1.11
-0.93
5.71
5.88
5.45
0.24
0.22
0.24
15.62
5.14
184.65
iShares Treasury ETF
iShares Govt Inflation ETF
Russell Aust Select Corp Bond ETF
IGB
ILB
RCB
103.24
114
20.46
-1.15
-1.72
-0.55
5.51
6.22
3.84
0.26
0.26
0.28
16.58
32.31
79.18
Russell Aust Govt Bond ETF
RGB
21.28
-1.26
6.86
0.24
132.17
Russell Aust Semi-Govt Bond ETF
Vanguard Aust Fxd Int Index ETF
RSM
VAF
20.77
50.05
-0.605
-0.93
5.03
5.47
0.26
0.20
125.23
199.88
Vanguard Aust Govt Bond Index ETF
VGB
49.01
-1.02
5.68
0.20
49.37
*1m/1y performance as at end of June 2015. Closing price as at month end. Return in AUD before fees
Disclaimer: YieldReport is independent of any product provider and receives no commissions or fees from any products described herein. The
information contained within this report is based on information that YieldReport Pty Ltd (ACN 163481678 Authorised Representative of TAG Asset
Consulting AFSL 230846) believes to be reliable however its accuracy and completeness cannot be guaranteed. This report contains general advice
only and is made without consideration of any specific client investment objectives, financial situation or needs. Accordingly, the reader should,
before acting on the advice, consider the appropriateness of the advice, having regard to their objectives, financial situation and needs. Those acting
upon such information do so entirely at their own risk. If you are seeking to acquire a specific financial product or security, you should obtain a copy
of and consider a Product Disclosure Statement ("PDS") or Prospectus for that product before making any decision. © YieldReport 2015.
31