News

The Reserve Bank of Australia (RBA)'s surprise decision to leave cash rates unchanged at 4.25 per cent at its February 7 meeting has caused some strategists to reduce their expectations for the extent of rate cuts likely in 2012. While acknowledging that the outcome in Australia will be dictated to a large extent by global events, the tone of several research reports released after the RBA announcement leans towards reduced rate cut expectations.

KfW Bankengruppe (KfW) (AAA/Aaa/AAA), so far the only supranational, sovereign and agency (SSA) borrower to tap the Kangaroo market in 2012, priced its third transaction of the year on February 7. The German agency increased its February 2018 Kangaroo to A$2.05 billion (US$1.67 billion) outstanding via the addition of A$500 million.

The first Kauri deal of the new year priced on February 8 as World Bank (AAA/Aaa) priced an increase to its existing August 2016 line. The tap was upsized to NZ$325 million (US$271.5 million) from NZ$200 million at launch, and added to a line which World Bank introduced in August last year as its only Kauri transaction of 2011.

Following the pricing of Industrial Bank of Korea (IBK)'s (A/A1) A$350 million (US$375.2 million) Kangaroo debut on January 17, Korea Finance Corporation (KoFC) (A/A+) priced its own inaugural Kangaroo transaction on February 7. Following completion of the latest deal, 2012 has become the first year in which more than a single Asian financial institution (FI) Kangaroo has priced since 1996.

The issuer of the largest floating-rate note (FRN) transaction issued by an Australian semi-government, Treasury Corporation of Victoria, says the investor base for its most recent deal was notably wider than was the case in previous such transactions. It also, unlike other FRNs issued by Australian states in recent times, saw a significant domestic bid.

  More deal flow emerged in the Australian domestic market at the turn of the second month of the year, with a number of semi-government placements and the second transactions of 2012 from both the domestic corporate and high-grade Kangaroo sectors. Perhaps the most significant transaction, though, was the first domestic senior unsecured bank deal of the year.

The issuer of Australia's first domestic senior unsecured bank deal of 2012, Rabobank Nederland Australia Branch (Rabobank Australia), says the transaction demonstrates the ongoing investor support for the asset class despite the recent issuance focus on covered bonds. While price discovery was challenging given the lack of recent comparable transactions, Rabobank Australia also says the February 2 tap to its April 2015 line attracted broad demand.

KfW Bankengruppe (KfW) (AAA/Aaa/AAA) – so far the only supranational, sovereign and agency (SSA) Kangaroo issuer of the new year – priced its second Australian dollar transaction of 2012 on February 2. The deal, a 2022 maturity, is also the first new Kangaroo line to be introduced by an SSA borrower since November last year.

The second Australian corporate deal of 2012 priced on February 1 as Volkswagen Financial Services Australia (VW Australia) (A-/A3) increased its January 2015 domestic line by A$150 million (US$159.5 million). The tap, which had launch volume of A$100 million, is the first increase to a line which was introduced in January last year in a A$150 million transaction.

Fitch Ratings (Fitch) concluded its negative ratings watch on the Australian major banks on February 24, downgrading three of the big four to leave all the majors with equal ratings of AA- stable. The negative watch, which began on January 30, came following a Fitch review of the world's largest banks and the publication of its special report on major banks of Australia and Canada.

Westpac Banking Corporation (Westpac)'s inaugural A$3.1 billion (US$3.3 billion) domestic covered bond transaction was another well-received deal, its issuer and lead managers say. Following on from the success of Australia's first domestic covered bond, the deal points to a continued trend of domestic real money participation in the sector.

The week beginning January 23 saw both the second Australian dollar covered bond transaction and the second domestic corporate issue of the year price. Elsewhere other sectors in both Australia and New Zealand remained quiet.