QBE issues new fixed and floating rate bonds as credit markets open for business

QBE Insurance Group Limited has launched a dual-tranche AUD-denominated subordinated note offering, consisting of an 11-year non-call 6-year Floating Rate Note and a Fixed-to-Floating structure. The issuer raised AUD325 million in the fixed rate tranche and AUD275 million in the floating rate tranche. Initial price guidance was set at a margin of +220bps, implying an indicative yield of 6.01% to the May 2031 call date. On the back of strong demand, guidance tightened to +215bps (5.99%) at launch, with final pricing at +195bps (5.802%), reflecting a total spread compression of 25bps.

Pricing appears broadly in line with expectations. The new notes are comparable to QBE’s 12NC7 subordinated bond, which is callable in the same year and currently trades around +196bps. Given the similar structure, size, and maturity profile, we expect the new issue to trade in line with the 12NC7 as the initial new issue concession narrows in the secondary market. Notably, strong demand for the new issue appears to be driving spread tightening in comparable bonds. If market confidence continues to improve in the coming weeks, this credit spread compression could easily continue.

The fixed rate tranche attracted stronger investor demand, reflecting a preference for yield certainty amid continued uncertainty around the direction of benchmark interest rates. Market participants appear cautious, balancing the near-term risk of RBA rate cuts with the medium-term possibility that renewed tariff pressures could sustain inflation and keep rates elevated for longer. Locking in attractive fixed yields now may be seen as a hedge against volatility in floating benchmarks. QBE remains a frequent issuer in the AUD market, with a larger issuance footprint than other domestic insurance peers. The bond’s relative liquidity and QBE’s strong credit profile make it an appealing choice for investors seeking diversification into higher-rated AUD credit.

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