Apple poised to join Australia’s bond market wagon

3.39% The present average yield on corporate bonds in Australia

APPLE is poised to join a swathe of domestic and offshore companies fuelling Australia’s busiest corporate bond market in three years.

Non-financial issuers including miner BHP Billiton and supermarket owner Wesfarmers have sold A$6.6 billion (R62.64bn) of bonds in Australia so far this year, the most for any comparable period since 2012, according to data. Brewing giant SABMiller raised A$700 million with its debut sale last month and iPhone maker Apple has been talking with investors this week.

Borrowers are taking advantage of Australian yields that touched record lows this year as the central bank cut its benchmark cash rate to an unprecedented level. Sales from local issuers could ramp up in coming months after Australia’s largest companies wrap up earnings announcements.

“From the corporate side, borrowers are trying to lock in levels of funding that are fairly low historically,” said Mark Bayley, a credit strategist at Aquasia. The emergence of new issuers in the Australian market may be “a sign the domestic market is coming of age,” he said.

The volume of funding has increased from A$4.9bn at the same stage in 2014. BHP brought an offering of A$1bn in March, casino operator Crown Resorts issued A$630m of subordinated notes in April, while BMW’s local unit and Wesfarmers have each sold A$500m of securities.

The average yield on corporate bonds in Australia fell as low as a record 3.07 percent in April, and was at 3.39 percent on Monday, according to a Bank of America Merrill Lynch index. The rate was 44 basis points below where it was a year earlier.

Technology behemoth Apple has hired Commonwealth Bank of Australia, Deutsche Bank and Goldman Sachs to host calls with fixed-income investors, the sale managers said on Monday.

The Aussie dollar would be the sixth currency Apple has picked for bond issuance if it chooses to proceed.

Perpetual’s deputy head of credit and fixed income Vivek Prabhu said his firm’s diversified income fund has “rarely had a higher exposure to corporates” than now.

“This fund’s been going for almost 10 years now and traditionally corporate exposure would be around the 5 to 10 percent area, and currently it’s above 25 percent, which is indicative of the number of opportunities that have become available in terms of corporates coming to market but also their compelling relative value,” said Prabhu, who helps oversee about A$6.1bn in fixed income assets at Perpetual.

The 24 issuers that have priced deals so far this year compares with 25 at the same stage in 2014. In addition to SABMiller, owner of Australia’s iconic Foster’s beer brand, borrowers that have brought deals to the market this quarter include Volkswagen, the owner of the Dampier-to-Bunbury natural gas pipeline and the University of Sydney. – Bloomberg