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Listed Debt Securities Indices Performance Review


April 2017

Prices still increasing

The Australia Ratings listed debt securities Combined index put on 0.58% for the month of April or 7.14% on an annualised basis. The return was led by the Red index, which increased by 0.68% despite the $2.6 billion of new issues entering the sector in the first quarter of this year and a further $510 million of supply seen during the month of April.

See Combined Index and Weighted Average 

Price increases were seen across virtually all of the constituents of the Red index, being driven by accrual of distributions and demand from investors looking for higher yields, particularly among some securities that may have previously been overlooked. AMPPA stands out in this respect with a price increase of $2.60, to end the month at $105.30.

The Orange and Yellow indices were also positive contributors, increasing by 0.11% and 0.05% over the month. While distributions continued to accrue on these securities price performance was patchy.

The Crown Resorts CWNHA notes increased in price over the month, no doubt reflecting the continuing on market buying activity of Crown Resorts, which acquired a further 35,000 notes over the month. Conversely, the price of the Crown Resorts CWNHB notes, which are not the subject of a buyback, fell.

The Green and Blue indices fell over the month by 0.02% and 0.79%, respectively. While the new Qube subordinated notes (QUBHA) went ex-distribution in March, investor enthusiasm seems to have declined in April.

Among constituents of the Green index, the Australian Unity Series B bonds (AYUHB) went ex-distribution during the month and the price fell as a result, but by less than the value of the distribution. The Tattersalls notes (TTSHA) also experienced a price decline, perhaps being adversely impacted by uncertainty emerging around the future of the takeover by Tabcorp or alternatively, it is the second lowest yielding bond in the market and may well have experienced some profit taking by investors.

Chart 1: Movement in the Australia Ratings indices from December 2014

Indices April performance review

Source: ADCM Services, Ord Minnett


Debt Securities’ Level of Complexity (PCI):

Green - simple; Blue – relatively simple; Yellow – complex; Orange – more complex; Red – very complex Dotted dark grey - Unfranked; Dotted light grey - Franked; Black - Combined

The Unfranked and Franked indices managed to eke out a positive return of just 0.01% in the case of the former, and 0.61% for the latter.

Weighted average yield increased across the Green, Blue and Yellow indices as prices declined on average among constituents in the Green and Blue indices and the weighting of the Crown Resorts CWNHA notes fell as the number of notes outstanding declined. Yields fell in the Orange, Red and Combined indices.

Chart 2: 

Movements in Weighted Average Yields by Index from December 2014


Source: ADCM Services, Ord Minnett

 

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