In a sign of the times ASB is borrowing NZ$600 million through a five-year bond issue that will pay investors an interest rate of just 1.83% a year.
The fixed-rate ASB unsecured unsubordinated notes were priced at a margin of 0.85% over the swap rate on Tuesday. The pricing was at the low end of an indicative margin of 0.85% to 0.88% per annum.
ASB confirmed the offer as recently as Monday with the closing date brought forward by a day. The offer sought $100 million but was open to unlimited over subscriptions. ASB says the money borrowed will be used for "general business purposes."
The ASB bond issue comes after the Reserve Bank, in a surprise move, cut the Official Cash Rate (OCR) by 50 basis points last week to just 1%. Many economists are picking the OCR will go even lower.
In a similar offer late last month, before the OCR cut, Westpac NZ borrowed $900 million through a five-year bond issue that will pay investors 2.22% per annum. That Westpac offer is the equal biggest non-government debt issue made in NZ.
The ASB offer was open to institutional and retail investors in New Zealand and "certain" offshore institutional investors. The minimum application amount was a retail investor friendly $5,000. The ASB notes will be issued on August 19. They're expected to be quoted on the NZX and have an AA- credit rating from S&P Global Ratings, and an A1 rating from Moody’s.
There's more detail available in a terms sheet here.
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13 Comments
I would love one of these mortgages:
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
Interest rates aren't going anywhere but down. Ideally, OCR cuts are supposed to boost economic activity as businesses gain access to cheaper funding for expansion.
However, most of the new money created by banks is pumped into speculative assets, which are unlikely to create any sort of inflationary pressures (except in asset prices).
We are in a world where the tail is wagging the dog; the financial industry is now at the center of the global economy attempting to drive growth in other sectors instead of it being the other way round.
Yes, the Future is Here..
'Danish bank launches negative interest rate mortgage in world first'.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
'New Zealand just became the first country to legalize salary payments in cryptocurrencies '
Another first for New Zealand.
May be the right way to go in these days of low/negative interest rates ?
Wonder how many will take this option...
https://markets.businessinsider.com/news/stocks/new-zealand-legalizes-c…
ASB is paying to much see what the expert say. https://www.rt.com/shows/keiser-report/466365-dotcom-bubble-debt-market/
Who would be stupid enough to tie up their money for something that wont even preserve its value after inflation. The Aussie parent must be in fits of laughter about the stupid kiwis. Love the analogy by Bob Cotton of the Aussies strangling the kiwi.....LOL, yet sad that the NZ government allows foriegners to own a bank in NZ.
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