Guarantor: Ford Motor Credit Co
Maturity: September 3, 2004
Issue price: 101.445
Spread at launch: 93bp over the 9% September 2004 CGB
Launched: Thursday August 5
Lead mgr: RBC DS
We have been seeing very good demand for the currency recently and decided to supply the market with this Ford transaction. The Toyota five year deal we recently launched went very well and this is targeted at the same investors. So far, everyone who participated in the group has been extremely positive on this deal.
The Ford Credit name is very well received, particularly in the Benelux where most of this will end up. We will also sell some of the paper into Switzerland and the Far East.
Some of the German houses we might expect to participate in a Aussie dollar issue declined, but they are just not seeing many Aussie dollar flows.
Over the next couple of months there will be over A$1bn of redemptions. We expect about 25% to 30% of those funds to be reinvested in the Australian currency and this Ford issue is well placed to take the lion's share of those flows.
With its 6.75% coupon - the highest for a long time in this market - it is real retail fodder.
We have also seen some switches from other deals into this transaction by institutions, which is unusual for this market. That is happening because, with its 93bp spread, this offers a pick-up of 40bp-50bp over most Aussie dollar issues - particularly some of the larger deals that institutions take and which are trading at expensive levels.
Ford Australia had a need for Aussie dollars and we were happy to launch the deal for them.
The bigger markets may be difficult for credit products at the moment, but Ford is a name that will always be popular with retail and this should remain insulated from the more general market problems.
"...we guess the rationale behind this deal is the coming level of redemptions in the Aussie dollar market. Redemption flows are good - not huge amounts, but sufficient to justify this deal.
There are only two other deals in the primary market, one of which goes secondary in a day or two and the other in a couple of weeks.
RBC DS didn't lead either of those issues so it is probably happy to have a deal of its own to sell to its clients.
Ford is a nice name to see as it issues at a good spread from an investor's perspective.
This means that it will be difficult for another deal to come out and trump this, even at a shorter maturity.
The spread of nearly 100bp over the curve is excellent, some 30bp-50bp higher than most of the recent issues. This enabled a coupon which was 0.25%-0.5% higher."
"...we were very happy to see a new Aussie dollar issue as the primary market is almost empty. We are seeing good demand as buying is driven not only by redemptions, but also from new money coming into the currency because of the higher spread over US dollars.
We were also pleased to see Ford in the market. It is a good retail name and it pays a pretty good spread.
Furthermore, the spread was not only high compared to other issues, but also high for a retail deal, given that most borrowers are more aggressive in the retail markets."
"...we see regular flows in the Aussie dollar market and we welcomed this new issue as there is little primary paper around. The currency is popular with Benelux investors at the moment and this has everything necessary to succeed. Ford is a popular name, but at the same time it pays an attractive coupon."
Compiled by Glenn Blackley,
RBC DS Global Markets, London. Tel: +44 171-653 4557
A strong week for commodity prices augured well for dollar bloc currencies, helping the Australian dollar to push above its recent base of US$0.6485/A$.
A rise in the CRB index underpinned the move with the index closing above its 200 day moving average for the first time since late 1997.
The positive sentiment saw the Australian dollar surge to a two week high of US$0.66/A$, but a number of options related stops and late weakness in regional stockmarkets brought the unit down from its highs to US$0.6565/A$.
Retail trade data posted a lower-than-expected gain of just 0.1%, adding a bid tone to the domestic bond market.
Expectations had centered upon an increase of 0.5%, but market participants suggested the result reflected a postponement of purchases ahead of expected July sales as well as a cut in the wholesale tax rate on some goods on 29 July, rather than a fundamental downturn in domestic demand.
The release of the data underpinned a rally in the domestic bond market, where yields had been drifting lower on the back of offshore influences. Follow-through support from offshore buyers saw spreads against the dollar bloc narrow, with the 10 year spread to the US tightening to 30bp from above 35bp.