News

Following the confirmation of its position as Australia's third-largest state term funder Western Australian Treasury Corporation (WATC) says its issuance strategy will remain broadly consistent with its approach in previous years. Having recently become the last of Australia's sovereign and semi-government borrowers to issue bonds via syndication, WATC has also left open the possibility of further bookbuilt deal flow in future.

Strong demand for Suncorp Metway (Suncorp)'s debut covered bond transaction on May 30 – also the first domestic Australian covered bond issue from a borrower outside the big four banks – enabled the issuer to increase the size of its fixed-rate offering and add a floating-rate note (FRN) component. Suncorp says it hopes to use the domestic debut as the springboard for future Swiss franc and euro covered bond issuance.

Tatts Group (Tatts) closed its senior retail bond transaction on June 29, with final volume, at A$194.7 million (US$199.8 million) marginally below the A$200 million initial target. The company announced on June 6 that it has set the deal's margin at 310 basis points over bank bill swap rate – the wider end of its 20 basis point marketing range.

A new residential mortgage-backed securities (RMBS) transaction from Resimac priced on June 1, with the structure of the deal including both US and Australian dollar tranches. Premier Series 2012-1 closed at its inital volume of A$243 million (US$235.5 million) – spread across four tranches – and US$250 million in a single tranche.

The addition of a 144A capability to Queensland Treasury Corporation (QTC)'s domestic bond programme demonstrates the increasing importance of accessing demand for bonds in the primary market, the treasury corporation says. And despite the intricacies of adding US market language to a domestic programme, QTC's arranger says more borrowers may choose to follow suit.

The issuer and leads of the most recent Kangaroo residential mortgage-backed securities transaction – just the second ever to come to market – say they hope the time taken to establish programmes and investor familiarity will be rewarded by future issuance opportunities. Both Kangaroos to date have been based on UK mortgages, and the UK continues to be seen as the most likely source of further deal flow.

The fourth week of May saw an uptick in asset-backed security launches, with one deal pricing this week. New Zealand kept busy with the announcement of the 2013 national budget while bond deal activity on both sides of the Tasman slowed.

The New Zealand Debt Management Office (NZDMO)'s borrowing programme for the next four financial years, published alongside the national budget on May 24, projects steadily falling issuance in the years to 2015/16. The issuance figure for the current financial year has been increased by NZ$1.5 billion (US$1.1 billion), to NZ$15 billion, as part of a plan to reduce Treasury bill outstandings by NZ$4 billion in 2012/13.

On May 23, Bank of Queensland (BOQ) returned to the non-mortgage asset-backed securities (ABS) market for the first time since 2008 with its A$700 million (US$683.8 million) Series 2012-1E Reds EHP Trust auto-loan backed transaction. The deal's largest tranche comprises notes denominated in both Australian dollars and sterling.

The first covered bond issue from an Australian bank outside the big four will, subject to market conditions, be a domestic transaction from Suncorp Metway (Suncorp). Having had provisional ratings attached to the deal on May 21, the bank mandated a lead manager group on May 29 and announced its plans to issue a four- or five-year deal with "a strong bias for a fixed tranche".

Sources familiar with Heritage Bank's senior retail notes offer say the transaction's bookbuild closed three days ahead of the scheduled May 24 date on the back of significant demand. The deal's final size is likely to be in the A$220-250 million (US$215.2-244.5 million) range – nearly double its launch volume – and one source tells KangaNews the offer attracted oversubscriptions of almost four times the original issue amount.

Renewed Eurozone volatility continues to keep a cap on Australian domestic investor participation in Kangaroo transactions, market participants say. But with a solid international bid enabling a steady flow of smaller deals from less-frequent Kangaroo borrowers, intermediaries believe the market remains functional with manageable pricing for some global borrowers.