News

The decision by the Reserve Bank of Australia (RBA) to cut the cash rate by 25 basis points, to 3 per cent, has been greeted with little or no surprise by analysts. Most post-decision commentary homed in on the likelihood – or otherwise – of the latest cut stimulating Australia's non-resources economy, with many analysts saying there is little reason to think the loosening cycle is at or even near its end.

The new 2017 maturity issue priced on November 30 by Queensland Treasury Corporation (QTC) (AA+/Aa1/AA) had final volume of A$1 billion (US$1.04 billion) but a book four times larger, the issuer tells KangaNews. QTC capped the size of the syndicated issue of the new benchmark line in accordance with its funding need for the first half of its 2012/13 budget year.

Ahead of the December 3 bookbuild of MYOB's subordinated retail bond offer, arranger and lead manager sources say they are confident that the transaction will close a highly-active year in the retail market on a high note. The transaction is for an indicative A$125 million (US$130.3 million) of five-year tenor paper, and is expected to pay a margin of 670-690 basis points over three-month bank bills.

Kiwibank's issue of the first tier two instrument in the New Zealand market to contain explicit loss-absorbency language achieved strong investor support despite the securities' sub-investment grade rating, the issuer and its arranger say. The deal's structure made for an overwhelmingly retail buyer base, but in a market which continues to feature limited retail supply Kiwibank believes further subordinated bank issuance could find a welcoming home.

The suggestion by the International Monetary Fund (IMF) that the Australian dollar could in future be included in reporting of the currency composition of foreign exchange reserves (COFER) is more likely to be a sign of the currency's increased use in global reserves than a driver of future buying. In addition, market sources say reserve managers have been aware of the IMF's thinking for some months and any demand impact is mostly played out.

In a speech discussing implementation of the 18th National Congress of the Communist Party of China (CPC) – which will set the political agenda for China over the next five years – People's Bank of China (PBoC) governor, Zhou Xiaochuan, highlighted the country's bond market as a target for development. Zhou referred to both the mainland and Hong Kong markets and referred explicitly to the internationalisation of China's financial sector.

Edinburgh-based Sebastian MacKay, investment director at Standard Life Investments, who is part of a team managing US$2.5 billion of global bonds, talks to KangaNews about Australasian fixed income products and the global economy.

Swiss power and automation technology firm ABB (A/A2) priced its first Australian market bond deal on November 15, via fully-guaranteed local subsidiary ABB Finance Australia. The deal closed with final volume of A$400 million (US$414.4 million) – an upsize of A$100 million from launch – and attracted a book of over A$1 billion from more than a hundred accounts, according to its leads.

Non-financial corporate issuance in Australia is set for an all-time record volume month in November 2012 having surpassed the record for full-year issuance by early in the fourth quarter. More than A$10 billion (US$10.4 billion) of true corporate bonds had come to market in 2012 by mid-November, the first time the Australian market has ever reached this milestone without the contribution of credit-wrapped paper.

On November 8 Telstra Corporation (Telstra) (A/A2/A) returned to the domestic market with a new five-year, A$750 million (US$779.9 million) benchmark line. Lead managers say the deal – which was upsized from a launch volume of A$500 million – was supported by a strong international bid and numerous domestic accounts.

A capital transaction priced on November 5 by a group of Australian mutual authorised deposit-taking institutions could lead to future pooled funding deals, the group hopes – including in senior unsecured and covered bond format. The new deal, issued by the Australian Mutual Investment Trust (AMIT), will re-finance lower tier two debt issued by 17 mutuals in 2006.

A wave of significant changes to the global UBS Investment Bank (UBS) business that are the basis of an expected 10,000 reduction in headcount do not affect the Australian operation, the bank says. A spokesperson tells KangaNews the Australian business is already structured in line with global goals, so moves which already include the shuttering of UBS's supranational, sovereign and agency (SSA) business in London do not necessitate changes locally.