Bought QBE 5.25% USD perp at 101.80

by

  • QBE Insurance Group Limited 5.25% USD Perp
  • Issuer Rating: A-(S&P positive), Baa1 (Moody’s, stable), A- (Fitch, positive)
  • Issue Rating : Baa3 (Moody’s), BBB-(Fitch)
  • Issue size : US$400M
  • First call: 16 May 2025, and every 5 years thereafter
  • Reset : 5Y UST + 3.047%
  • APRA (Australian Prudential Regulation Authority which overseas banks and insurance in Australia) may decide to write off if non-viability trigger event occurs.
  • YTC : 4.86%
  • Net supercharge yield on funding US$65k and financing the rest at 2.5% : 9.6%
  • Stock has been paying dividends in last 10 years
  • Debt to asset of 8%
  • Debt to total equity of 33%

I observed that Australian bond prices are very high, and 101.8 seems cheap to me as I expect their fair price to be about 104.

Look at the 1 year stock charts of ANZ (first chart) and QBE (second chart).

They look similar.

Lets now take a look at the price of ANZ 6.75% USD perp, with call date on Jun 2026, and with similar non-viability event or write offs. The price is ……………………. 114!

https://www.bondsupermart.com/main/bond-info/bond-factsheet/USQ08328AA64

I do not think QBE 5.25% can go to 114, but 104 is probably within its means.

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