News

KfW Bankengruppe (KfW) (AAA/Aaa/AAA) priced a tap to its 5.75 per cent 2015 Kangaroo on May 3, in its sixth offering in 2012. The deal adds to the A$2.2 billion (US$ 2.267 billion) outstanding in the line, and to KfW's Kangaroo total of A$20.75 billion total outstanding in 12 lines. Its last Kangaroo transaction was on March 28, for A$700 million of 2016 notes.

Morgan Stanley (A-/A2/A) launched its second Australian dollar-denominated global bond transaction in just over a year on May 2, announcing plans to place a new five-year line. In February 2011 the bank placed A$850 million (US$879.6 million) in a 2016 maturity global deal, which it followed in May the same year with the pricing of a A$500 million, three-year Kangaroo.

At its half-year results presentation on May 2, ANZ Banking Group (ANZ) revealed that its reliance on offshore term funding has continued to fall although the growth of the domestic proportion of the bank's total term book was small in the first half of 2011/12. ANZ issued 44 per cent of its first half term debt in Australian and New Zealand dollars; 34 per cent of the bank's term debt outstanding was denominated in domestic currencies by March 31 2012.

The 50 basis point cash rate cut announced by the Reserve Bank of Australia (RBA) on May 1 largely took most local strategists by surprise and left expectations of the future direction of RBA decisions divergent. While some believe the cut signals a more dovish RBA tendency others believe the central bank may already have completed its likely downward path; still more say the future direction is now too difficult to call.

The stable funding note (SFN) priced by Rabobank Nederland Australia Branch (Rabobank Australia) (AA/Aaa/AA) on April 30 enabled the bank to capture demand from investors in shorter-tenor securities while still satisfying net stable funding ratio (NSFR) rules, issuer and lead say. The A$325 million (US$338.9 million) deal has a five-year maturity but also includes a put option allowing holders to cash out of their investment with 12 months' notice.

Although a May 1 cash rate cut by the Reserve Bank of Australia (RBA) is considered virtually inevitable by local economists, there is an expectation that international demand for AUD-denominated assets should prove resilient even to a more prolonged downward rates trend. Some economists also believe the extent of future rate cuts is being overstated by market pricing.

Deal flow took the week off as Anzac day fell mid-week and volatility continued in the market. There were no public syndicated transactions in either the Australian or New Zealand markets, from domestic or offshore borrowers.

A consultation document on Australia's implementation of its G20 OTC derivatives commitments published by the country's Treasury suggests an incentives-based drive towards central counterparty (CCP) clearing is preferred to a mandated approach. But the document also reiterates the Australian government's commitment that "all standardised OTC derivatives contracts" should be CCP cleared.

Powercor Australia (Powercor) (A-) priced its first Australian dollar transaction since August 2007 on April 19, announcing plans to place A$200 million (US$207.5 million) of new five-year bonds at an expected price of 170 basis points over swap.

Suncorp Metway (Suncorp) priced a new domestic three-year deal on April 18 in what will be the issuer's first domestic bond transaction since May 2011. Market sources had suggested during the first quarter of 2012 that Suncorp was close to placing a domestic covered bond transaction, but its first deal action of the year in fact marks a return to unsecured issuance.

Rabobank Nederland New Zealand Branch (Rabobank New Zealand) (AA/Aaa/AA) priced its third domestic deal of the year on April 20 in a new five-year issue. At an indicative 180 basis points over swap, the new deal's margin falls in line with the bank's two other domestic deals of 2012.

Subdued deal flow continued into the second week of April – a week without public activity in New Zealand or issuance in the Australian credit or Kangaroo markets. A single domestic Australian dollar bond deal priced from New South Wales Treasury Corporation, while Australia also saw its second residential mortgage-backed securities issue of 2012.