Whenever the bond market throws up a new issue that defies all the usual risk-reward logic, Bill Blain at Mint Partners reminds readers of his morning note about the “Ukrainian Chicken Farm Moment.”
The anecdote tells the story of a bond sale from a poultry company in the eastern-European nation where investors clamored after the high-yielding debt only to find a week later that bird flu had killed off all the chickens.
This summer has provided no shortage of the kind of new-issue froth Blain is warning against, including from Ukraine itself, which plans to sell bonds in the coming days. We’ve also had Tajikistan wooing investors with this map, Tesla Inc. shrugging off negative cash-flow to sell at a record-low yield and a “mind-blowing” bond from Austria.
With so much to choose from, we compiled a shortlist, in order of yield size, of the best examples of market exuberance from the new-issue market in the past three months.
Austria
The Alpine nation is the talk of the market this week after it sold 3.5 billion euros ($4.2 billion) of century bonds for a yield below that of 10-year U.S. Treasuries. The combination of a low interest rate and long maturity makes the bond the most price-sensitive vanilla government security out there. Investors placed almost 11 billion euros of orders.
Issue date: Sept. 12
Yield: 2.1 percent vs. initial price target of about 2.2 percent
S&P credit rating: AA+