Daily Commentary BY THE CURVE TEAM –

Weekly Insights – Bond Opportunities From Market Events

20th of September, 2021

Key Updates

Tuesday – RBA Minutes for the September Meeting

Thursday – Weekly Payrolls to August 28, Bank of England Meeting

Weekly Insights – Bond Opportunities From Market Events

Market events have created bond opportunities throughout the year. On 26 March, Archegos Capital had to liquidate billions of dollars of positions. Many banks bore the brunt of these losses, including Credit Suisse.  

Credit Suisse May ’23 floating bond is pictured. On 26 March, the yield skyrocketed around 20 basis points as investors panicked about Credit Suisse’s credit risk.

Credit Suisse has since recovered and the yield lies below the levels pre the Archegos event. It was a great opportunity to secure yield in a highly rated ADI, in a market where yield has been hard to come by.  

Macquarie Floating Rate Notes (FRNs) also provided an opportunity to capitalise on a market event. Inflation worries at the start of the year led to 5 year FRNs weakening. Further, on 1 April, Macquarie Bank were required to hold an additional $500 million capital buffer after multiple breaches of risk management and regulation, as determined by APRA.

APRA said “the breaches are historical and do not impact on the current overall soundness of Macquarie Group’s capital or liquidity positions”. Despite this, Macquarie bonds sold off, pushing yield up.  

As seen in the pictured graph, the impact of this led to a Macquarie December ’25 bond trading at a discount, and offering a capital gain to ‘buy and hold’ investors. Since then, yields have pulled in 15 basis points. Again, this posed a great opportunity to investors.

Curve has purchased just under $100 mill of this bond for investors, with the bulk of that amount when it was trading at a discount. A variety of clients, including fund managers, councils and ADIs have purchased the bond.

Macquarie was deemed by the regulators to no longer being in breach. The restrictions were purely backwards looking. 

Nicholas Allan

Associate - Money Markets