Asian banks, led by the Commonwealth Bank of Australia (CBA) and DBS Group of Singapore, have raised $4.75 billion in US dollar bond markets in separate transactions, according to term sheets seen by Reuters. The deals came amid a surge of bond issuance in the US by global investment-grade-rated companies, as some investors switched to buying top-rated corporate debt offering higher yields than those on government bonds.
CBA Issues Three Bonds Worth $3.25 Billion
CBA, which is Australia’s largest bank by market capitalisation, issued three bonds worth $3.25 billion in total, a term sheet showed. The bank declined to comment on the transaction.
The bank issued a five-year covered bond that raised $1.75 billion, a two-year fixed rate note that raised $900 million, and a two-year floating rate note that raised $600 million. The covered bond was priced at 5.479 per cent, the fixed rate note at 5.479 per cent, and the floating rate note at the Secured Overnight Financing Rate (SOFR) plus 61 basis points.
Covered bonds are debt securities backed by a pool of assets, such as mortgages or public sector loans, that remain on the issuer’s balance sheet. They offer investors a higher level of protection than unsecured bonds in case of default.
DBS Group Taps US Dollar Bond Markets for the First Time in Nearly Two Years
DBS Group, the largest bank in Southeast Asia by assets, tapped the US dollar bond markets for the first time in nearly two years as it raised $1.5 billion, according to a term sheet confirmed by the bank. The bank did not comment further on the deal.
The bank issued a two-year fixed rate bond that raised $750 million and a two-year floating rate note that raised the same amount. The fixed rate bond was priced at 5.479 per cent, while the floating rate note was priced at SOFR plus 61 basis points.
The bank said that the proceeds from the bonds would be used for its finance and treasury activities.
US and Asia-Based Investors Dominate the Demand
The bond issuances by CBA and DBS Group attracted strong demand from investors, especially from the US and Asia regions.
The five-year covered bond by CBA received orders of more than $3 billion, while the two-year fixed rate note and the two-year floating rate note received orders of more than $2 billion each, the term sheet showed.
The two-year fixed rate bond and the two-year floating rate note by DBS Group received orders of more than $2.65 billion and $2 billion respectively, according to the term sheet.
US and Asia-based investors bought nearly 90 per cent of the fixed bond and accounted for 98 per cent of the floating note issued by DBS Group, while they also bought a large share of the bonds issued by CBA.
Global Investment-Grade-Rated Companies Rush to Issue Bonds in the US
The bond issuances by CBA and DBS Group were part of a wave of bonds launched on Tuesday in the US by global investment-grade-rated companies, adding renewed pressure on long-end US Treasuries, as some investors switched to buying top-rated corporate debt offering higher yields than those on government bonds.
According to IFR, there were 21 issuances worth $31 billion on Tuesday in the US, including bonds from companies such as Apple, Toyota Motor Credit Corp, and PepsiCo.
The rush of bond issuance in the US came after the Labor Day holiday on Monday, as well as ahead of a possible tapering of bond purchases by the Federal Reserve later this year, which could push up borrowing costs for companies.
