Rabobank plans $419m Uridashi bond

Monday 18th May 2009

Rabobank Group plans to issue an $419 million uridashi bond early next month, the largest such sale this year, helping underpin a kiwi dollar dragged down by waning optimism about the global economy’s revival prospects.

The two-year bonds will be offered at a coupon of 3.2% and will mature in June 2011. The June 2 sale will be the largest uridashi denominated in kiwi dollars since Toyota Motor Credit Corp.’s $701 million issue on December 15. The kiwi dollar sank 1% to 58.31 US cents since Friday in New York as global sentiment soured on weak European economic data.

The bond issue should underpin “support for the kiwi at around 55-56 US cents” this week, said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. Some “$420 million should help” prevent it from breaking below its long-term range, he said.

Toyota Motor Credit Corp. and Kommunalbanken have each sold more than $300 million of individual uridashis this year, but Rabobank’s will be the first of the year worth more than $400 million. Uridashi bonds are sold to retail investors in Japan who want to benefit from higher returns that they can get in Japan, which has the lowest interest rates of any major economy and a central bank benchmark rate of just 0.1%.

Around $15 billion of New Zealand dollar uridashi and eurokiwi bonds are set to mature this year, according to Danica Hampton, currency strategist at Bank of New Zealand. She said the average coupon for a two-to-three year bond fell to 4.19% in the fourth quarter last year, down on the average 6.65 rate seen in the first three quarters of the year.

Six of seven analysts predict the kiwi will fall this week in a BusinessWire survey as optimism for a speedy economic recovery dwindled. The Chicago Board Options Exchange volatility index, or VIX, climbed 5.6% on Friday as Wall Street investors returned to the relative safety of the greenback and the yen.

The kiwi sank to 55.37 yen from 55.86 yen on Friday in New York.

Businesswire.co.nz

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