BNP subordinated (BBB+) 6% to Dec 2026

July 2024

Jenna Labib

BNP subordinated (BBB+) 6% to Dec 2026

Amidst volatility with the upcoming French election, one of our preferred trade ideas is the BNP tier 2 subordinated AUD bond rated BBB+, A-, Baa2 yielding 6% to the call date in December 2026. Please see attached the latest report from CreditSights on the implications for the French banks for the different election scenarios. Note that the French banks benefit from some of the highest ratings in Europe.

The focus last week was on the RBA’s policy meeting where rates were left on hold as expected but the tone of the statement and subsequent commentary was more hawkish than previous meetings, with obvious concern around the trajectory of inflation and the path to target. The board left all options on the table and reiterated their absolute focus on containing inflation and the desire to retain as much of the growth in jobs as possible. This time last week markets were pricing the cash rate at 4.19% by year end (-16 bps to cash). As of today, market pricing is +10 bps higher at 4.29% (-6 bps to cash). September pricing is actually suggesting a modest probability of a rate hike, +20% or +5 bps (4.40%). While another rate hike can’t be categorically ruled out, the board is continuing to discuss it after all – we see this as unlikely and expect they will be on hold for some time. In this environment, short-dated floating rate notes in portfolios look like good additions that will give strong income for the next 1-2 years.

Please see pricing below for the BNP investment grade tier 2, callable December 2026 yielding 6%:

Download the report

This report is provided to you or made available subject to and in accordance with the Research Report Disclosure and Disclaimer, please click here for these terms and conditions. If you have any queries please contact IAM.

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