HSBC to issue US$2.5 billion in convertible securities amid wave of high-grade bond sales
HSBC said it would issue a total of US$2.5 billion in convertible securities, adding to a global flurry of investment-grade bond issuance.
The bank intends to issue US$1.35 billion in 6.875 per cent perpetual subordinated contingent convertible securities that are callable during any 2030 securities optional redemption period; as well as US$1.15 billion in 6.950 per cent notes, callable during any 2034 securities optional redemption period, according to a filing on Thursday from HSBC.
The offerings come on the heels of HSBC’s June capital raising for S$1.5 billion (US$1.15 billion) via the same instrument at 5.25 per cent per annum. The new offerings come amid a flood of at least 81 other high-grade bond sales that have been launched or completed around the world this week, according to estimates from Bloomberg.
Investment-grade debt is in high demand as institutional investors are eager to lock in higher rates before a Fed cut would pull down yields. Traders now see a 55 per cent chance that the central bank will cut benchmark rates by 25 basis points at its September 17-18 meeting, while they expect a 45 per cent probability for a reduction of half a point, according to CME’s FedWatch Tool as of Wednesday.
“HSBC’s decision to issue perpetual bonds now is because investors are currently showing greater interest in bond investments that still have higher interest rates in anticipation that the rates may fall,” said Kenny Ng, a strategist at Everbright Securities International. “For fixed-income bond investors, these higher yield bonds are attractive in the medium to long-term.”
The anticipated rate cuts have been reflected in the falling US dollar exchange rate and some long-term American bond yields, Ng added.
“Now is a good time for banks and other corporates to issue bonds”, he said.
