NEW ISSUE “Florida Power & Light” may Sell $500m 10Y First Mortgage Bonds

“Florida Power & Light” may Sell $500m 10Y First Mortgage Bonds

May Price Today

Expected Ratings: Aa3 / A

Will Not Grow

Terms aren’t set yet



 Wells Fargo Bank

15YNC – 5Y Step Up Certificate of Deposit

Issuer:                   Wells Fargo Bank, N. A.

Price to Public:           100.00

Strike Date:          April 16, 2013
Issue Date:           April 19, 2013
Maturity Date:        April 19, 2028  (approximately 15 years)
Call Provision:       April 19, 2018, quarterly thereafter
Deposit Amount:       $1,000 minimum with $1,000 increments thereafter

Coupon:     Y1-5     @  2.25%
Y6-9     @  2.75%
Y10-11   @  3.50%
Y11-13   @  4.25%
Y14-15   @  7.00%

Coupon Periods:  Paid quarterly, Act/365

YTM:              3.27%

FDIC Insurance   $250,000.00

CHINESE CPI creeps higher via food prices

Chinese CPI creeps higher via food prices, but watch housing ..

Chinese data flow this week (trade yesterday and CPI today) speaks to us that policy changes are not required in the near term as the economy appears to have finished 2012 on a firm footing.  This is in contrast with the Xinhua news headline spotted earlier this week claiming that a RRR cut was on the cards soon.  We expect the PBoC to sit tight for some time as we await the priorities and policies for 2013 and beyond from the newly installed Xi and Li government.

The market’s attention should swing to next Friday’s Q4 GDP.  Leading indicators of activity such as the PMIs suggested that Dec qtr GDP could re-accelerate from 7.4% to around 7.8%/yr, which is the consensus view (range 7.4% to 8.6%) and yesterday’s trade data hints that net exports could add to GDP after being a consistent drag since late 2011.  An outcome close to consensus generates a 2012 calendar average GDP growth of 7.8%, down from 9.3% in 2011 and above the unofficial target of 7½%.

At the time of writing the 2013 GDP target is yet to be announced.  Speculation is that the 7½% target will be repeated, however, we lean towards repeating and confirming the original 12th 5-Year Plan target of 7% (which we suspect has been forgotten by consensus).  A target of 7% dovetails with the new administration’s so far unspecified goals of “more sustainable growth”.  While it is also easier to over-achieve, early signs are that this is no longer the goal of the Chinese government.

Data detail – inflation

Inflation in December popped higher from 2.0% to 2.5%/yr (mkt 2.3%), the highest since May.

Food price inflation was the upside culprit, rising to 4.2%/yr after 3.0% in November via a 10.3%/yr pop in vegetable prices and a sharp turnaround in pork prices from -11.5%/yr to -6.2%/yr

Non-food price inflation remained static at 1.7%/yr, similar to the pace of the last four months. However, we note the creep higher of house price inflation, which since 2009 appears to be a leading indicator of overall inflation. One to watch, but we conclude that there’s no need to lower interest rates on today’s report.

PPI inflation improved modestly from -2.2%/yr to -1.9% (mkt -1.8%) with all three sub-components appearing to be past the trough (producer goods, manufactured goods and consumer goods.

Annette Beacher

TD Securities


Budget Surplus on Track, but Bond Supply Increases

New Zealand Budget update – more bonds ahead 

Budget updates in late December rarely garner a lot of attention, and with the commitment to achieve budget surplus by 2014/15 more or less intact despite the challenging revenue environment, there is little new news here. In fact more attention was required to digest the confusing NZDMO press release (attached).

The government estimates that it will continue to narrow the fiscal deficit this year to -$NZ7.3b (-3.4% of GDP) a $NZ600m improvement since May due to lower expenditure (due to lower inflation and interest rates). The widest fiscal deficit post global financial crisis was -$NZ18b (or -9.2% of GDP) two years ago.

The headlines attempted to fuss about the smaller expected surplus for

2014/15 (near-flat as a % of GDP compared with +0.1%) but in reality this is insignificant-the commitment to surplus and near-term peak in net debt are what matters for the ratings agencies.

Net debt is expected to peak at 29.5% of GDP in 2014/15, below the self-imposed 30% upper limit. The decline is more gradual compared with May, but is consistent with maintaining a relatively high credit rating.

The fiscal impact of the delay in asset sales is assumed to be minimal, even with the timing of the first sale closer to March-June 2013 than the May assumption of late 2012.

Economic projections: steady as she goes

Economic growth is forecast to increase by 2.3% and 2.9% in the years ending March 2013 and 2014 respectively, the same as TD. Rather, Treasury’s out year projections have been shaved down from 3% to 2.4%, abandoning all hope of achieving above-trend growth over the medium term.

Treasury assumes “Monetary policy support for the economy is forecast to continue for some time” but as “activity accelerates and inflation pressures pick up, interest rates are expected to rise gradually”. The exchange rate is expected to be a “drag on growth over much of the forecast period”. Nothing contentious here.

Borrowing requirements: less now, more later

The NZDMO announced an upgrade in 2012/13 issuance from $NZ13.5b to $NZ14b, but within that time-frame is the lofty $NZ11.27b April 2013 maturity, so there is actually minimal net new issuance for the year.

While global investors are seeking yield amongst a sea of zero interest rates, it would be prudent in our view to issue a little more in the near-term to pre-fund future requirements.

Further ahead, expected issuance has been increased in the out years

(chart) with 2014/15 lifted to $NZ10b and FY2016 and FY2017 at $NZ7b each. Who knows where yields will be in 2016/17?

The NZDMO introduced unnecessary complexity into its straightforward funding task. There has been a shift in tender scheduling, where the new inflation-index bond (Sept 2025) will be issued on the first Thursday of each month, where no nominal bonds will be issued. Nominal bonds will only be issued in subsequent weekly tenders. A specific schedule will be released shortly, but the focus on “25% less nominal issuance” could be seen as supportive for pricing in the near term.

The NZDMO intends to launch a new mid-curve nominal 2020 bond in “the near future”, where we suspect this maturity will be front-loaded as part of the funding task for the April 2013. In calendar 2012, with only one tender left on Thursday, total issuance will be $NZ14.7b, including the $NZ2.65b Sept 2025 linker issued by syndicate. Calendar

2011 was the peak in issuance at $NZ19b.

Ratings agencies: tick of approval

In an interview after the HYEFO, Moody’s analyst Steven Hess claimed the agency is comfortable with New Zealand’s Aaa/stable rating. S&P and Fitch rate New Zealand at AA/stable. All agencies would be comfortable with net debt peaking within the published time-frame.

Annette Beacher

Head of Asia-Pacific Research  FX and Rates Strategy TD Securities

Bond Alert

*Not QDI or DRD Eligible*


Aflac Incorporated

Aflac, Inc. is a general business holding company. The Company, through its subsidiaries, provides supplemental insurance to individuals in the United States and Japan.  Aflac’s products include accident/disability plans, cancer expense plans, short-term disability plans, sickness and hospital indemnity plans, hospital intensive care plans, and fixed-benefit dental plans.
Equity Symbol “AFL”
10MM shares
Baa1/BBB  (Stable/Negative)
$25 Par, Cumulative Preferred Subordinated Debentures

Maturity:  9/15/52
Non-Callable for 5 years
NYSE Listing

Not QDI or DRD Eligible

Expected Settle T+5

Price Talk: ~5.50% area

This is for informational purposes only; from sources the Firm believes reliable; may not be accurate or complete; is subject to change;  is not a recommendation or offer to buy/sell a financial instrument or adopt any investment strategy; is not legal, tax, credit or accounting advice.   Additional risks may exist that are not referenced. Past performance is not indicative of future returns. Other than CDs or CDARS, financial instruments: are not FDIC insured; are not deposits or other obligations of and are not guaranteed by the Firm or any bank or non-bank affiliate; and involve investment risk including possible loss of principal.