News

A shift in long-held domestic investor attitudes towards securitisation product, at least partly owing to the growth of KiwiSaver, paved the way for New Zealand's first residential mortgage-backed securities (RMBS) issue in four years, the deal's issuer and lead manager say. This sea change is also aiding participation further down the capital structure than ever before.

The largest true-corporate bond issue in the Australian domestic market for nearly a year reinforces Australia's position in the funding toolkit for global credit issuers, lead managers say. This is also demonstrated by the fact that the average number of investors participating in these transactions is growing.

After four consecutive rate hikes the Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) on hold at 3.5 per cent at its September meeting, which was held shortly in advance of New Zealand's general election. Analysts were universally expecting the pause and the consensus is now that will be on hold until at least March.

KangaNews understands the Australian Prudential Regulation Authority could be close to changing the liquid-assets requirements for authorised deposit-taking institutions (ADIs) which are branches of offshore banks. Market sources say there are two key measures under consideration: one would likely reduce the volume of liquid assets these banks are required to hold, the other could clear the way for greater allocation to securities which do not qualify as high-quality liquid assets (HQLAs).

The first release of second-round submissions to Australia's financial system inquiry reveals limited enthusiasm from market participants around the inquiry's interim report policy options concerning corporate bonds. A number of new submissions argue that easier access to retail issuance will make little difference to Australian corporate bond supply, while others reject the idea of removing dividend imputation as a way of levelling the tax playing field between equity and other asset classes.

Australia could be close to seeing its first wrapped transaction since the financial crisis. While the lone survivor in the Australian wrapper space – Assured Guaranty – claims the monoline wrap product can play a valuable role, domestic institutional investors say the rebirth will, at best, be gradual.

AMP Capital says persistent low yields have not dampened the growing appetite of Australian retail investors for credit – as demonstrated by the fund manager's Corporate Bond Fund passing A$1 billion (US$935.8 million) in funds after management early in August, four years after being made available to retail investors. AMP Capital is also confident the domestic-focused fund will see more investment opportunities in the coming months.

Moody's Investors Service (Moody's) downgraded its rating on the state of Western Australia (WA) – and on Western Australian Treasury Corporation (WATC) – to Aa1 on August 25, based on the rating agency's belief in a growing risk that WA's deteriorating debt metrics and ongoing deficit position "may not be reversed soon". Moody's also changed its outlook on the state's rating, to stable from negative.

The new powers which enabled the UK's Financial Conduct Authority (FCA) to impose a one-year ban on the sale of contingent convertible (CoCo) securities to retail investors are referenced in the Australian Securities and Investments Commission (ASIC)'s submission to the Australian financial system inquiry (FSI).

The New Zealand government is targeting reduced compliance costs for issuers and wider availability of instruments in the local retail market through a number of new policy decisions. A clutch of policy updates were revealed by Craig Foss, New Zealand's minister of commerce, at the KangaNews New Zealand DCM Summit in Auckland on August 6.

The prospects for issuance of green securitised product in Australia are being explored on the back of a number of breakthroughs for green assets, including the growth of socially responsible investment (SRI), Australia's first green-bond issue and a landmark US securitisation from Toyota Financial Service (Toyota). But Australian market participants acknowledge that local asset-backed deal flow in green format is likely a distant prospect.

National Australia Bank (NAB) and Westpac Institutional Bank (Westpac) scored notable successes as intermediaries in the Australian domestic bond market in the first half of the year, according to KangaNews league tables. Deutsche Bank's strength in the primary Kangaroo and semi-government markets put it in a leading position for aggregate Australian dollar issuance. Meanwhile, ANZ maintained its dominant status in New Zealand.