Daily Commentary BY THE CURVE TEAM –

Daily Insights – BOQ Bond Issue

21st of October, 2021

BOQ Issue

  • They printed $800 mill in a 5 year bond issue. $675 million floating and $125 mill fixed.
  • +80 is the floating margin over 3 month BBSW (which was 0.04% yesterday) and the fixed yield is 2.134% (with a coupon of 2.10%, meaning investors will pay a discount when buying the bond).
  • The difference between the floating and fixed implies that BBSW needs to average 1.30% over the next five years to make the returns of the bonds equivalent.
  • The margin appeared high compared to other recent issues. The end of the CLF and merger with ME restricting investor limits may have contributed to the high yields and may be a sign of further increases in yields as there are more issues.

Yields Jumped

  • BOQ’s issue prompted other bond yields to rise.
  • Notably, BOQ’s May 2026 FRN jumped about 10 basis points to be closer to +70.
  • Suncorp’s September 2026 FRN also jumped over 5 basis points from low +50’s.

UK Inflation

  • Was up 0.3% in September, leaves it 3.1% higher than last year.
  • Oil was the main driver, but core inflation was still 2.9%.
  • There is evidence of broad based inflation and a rise in inflation expectations, which means inflation is expected to be 4% by year end.
  • As a result, it appears the UK are closer to monetary policy tightening than Australia.

Josh Stewart

Associate - Money Markets