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3 Nov 2015
NZ LGFA tender preview – Westpac
FXStreet (Delhi) - Imre Speizer, Senior Markets Strategist at Westpac, notes that the NZ’z Wednesday’s tender of $140m LGFA bonds will be conducted amid soft secondary market performance and could result in tails of up to 5bp.
Key Quotes
“On offer are $20m 2019s, $50m 2023s, and $70m 2027s. These are currently priced at the following spreads over swap: 17bp, 29bp, and 42bp, respectively. The equivalent spreads over NZGB are: 43bp, 62bp, and 74bp.”
“Spread performance The multi-year decline in LGFA spreads (to NZGB ) ran out of steam in June amid a bout of global risk aversion. Global credit spreads have been volatile since, but are generally higher. NZ credit spreads appear to have lagged the global moves, leaving sentiment towards LGFA bonds currently weaker than it was a month ago.”
“Tender performance Spreads against NZGBs have widened at the last two tenders, and against swap have widened at the last three tenders.”
“Demand, measured by tail size (highest accepted less successful average), was strongest early this year but tails have since drifted higher. At the last tender, the 2023’s tail was 4bp and the 2027’s tail was 2bp. We expect tails for the 2023s and 2027s could be as large as 5bp at this tender.”
“Total tender supply at $140m is in the lower half of the historical range of $75m-$300m Tender bids close at 2:00pm NZT, with results published from then. Settlement is on 9 November.”
Key Quotes
“On offer are $20m 2019s, $50m 2023s, and $70m 2027s. These are currently priced at the following spreads over swap: 17bp, 29bp, and 42bp, respectively. The equivalent spreads over NZGB are: 43bp, 62bp, and 74bp.”
“Spread performance The multi-year decline in LGFA spreads (to NZGB ) ran out of steam in June amid a bout of global risk aversion. Global credit spreads have been volatile since, but are generally higher. NZ credit spreads appear to have lagged the global moves, leaving sentiment towards LGFA bonds currently weaker than it was a month ago.”
“Tender performance Spreads against NZGBs have widened at the last two tenders, and against swap have widened at the last three tenders.”
“Demand, measured by tail size (highest accepted less successful average), was strongest early this year but tails have since drifted higher. At the last tender, the 2023’s tail was 4bp and the 2027’s tail was 2bp. We expect tails for the 2023s and 2027s could be as large as 5bp at this tender.”
“Total tender supply at $140m is in the lower half of the historical range of $75m-$300m Tender bids close at 2:00pm NZT, with results published from then. Settlement is on 9 November.”