FIIG - The Fixed Income Experts

News and Education

New defensive DirectBond - Rabobank senior April 2024

by Justin McCarthy | Jul 15, 2014

Key points

  1. Rabobank is one of the strongest banks in the world
  2. The senior 5.5% fixed rate bond, with a maturity date of 11 April 2024, is a very defensive asset, albeit exposed to some risk of rising interest rates. It is an excellent alternative to lower yielding defensive fixed rate bonds that many clients are currently holding, particularly Telstra 2020s, Westpac 2020s and QTC 2033s
  3. Available to wholesale clients in minimum (face value) parcel sizes of A$10,000 and offers a very solid indicative yield to maturity of 4.58% and an expected annual income (or running yield) of 5.13%

Last week we added a very defensive bond to our DirectBond list which is an excellent alternative to other long dated fixed rate bonds held by many of our investors. The Rabobank senior 5.5% fixed rate bond, with a maturity date of 11 April 2024, is available to wholesale clients in minimum (face value) parcel sizes of A$10,000. The bond has an indicative yield to maturity of 4.58% and an expected annual income (or running yield) of 5.13%

The senior bond was issued by the Dutch-based parent company ‘Cooperatieve Centrale Raiffesen-Boerenleenbank B.A. (Rabobank Nederland) Australia Branch’ (Rabobank), which is viewed as one of the strongest banks in the world with a tier 1 capital ratio of 16.6% as at 31 December 2013. This compares to the Big Four Australian banks that have an average tier 1 capital ratio of around 10.4%.

On a relative value basis, the 2024 Rabobank senior bond offers compelling value,As the following relative value chart demonstrates, this bond compares very well with other long dated ‘defensive’ fixed rate bonds held by many of our clients:

Source: FIIG Securities

Given the outright return opportunity provided by the Rabobank bond, wholesale investors should strongly consider adding the 2020 bonds to their portfolios. Moreover, those wholesale investors currently holding the Telstra 2020, Westpac 2020 and QTC 2033 long dated ‘defensive’ fixed rate bonds may consider taking profits and switching into the new Rabobank DirectBond.

The Rabobank 2024 bonds provide wholesale investors with the ability to enhance their fixed income portfolio on several fronts due to their high fixed-rate return, diversification benefits and strong standing of Rabobank which is one of the highest rated banks in the world.

This bond particularly suits those investors looking to lock in a certain, fixed rate of return. However, those concerned by the prospects of rising interest rates in the future may prefer to look at floating rate notes.

Please speak to your FIIG representative if you are interested in any of these bonds.

All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities.

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