News

KangaNews has announced the best performers in its inaugural Fixed Income Research Survey, in which Australian investors were asked to recognise the performance of fixed income research across nine categories. Over 30 investment firms participated in the survey, representing the bulk of major institutional investment funds in the Australian market across the fund management, insurance and balance sheet sectors.

While renewed volatility caused by the European sovereign debt crisis has largely put a stop to issuance in recent days, intermediaries in New Zealand believe fundamental conditions are conducive to domestic deal flow with investors hungry for supply. However, a number of factors continue to limit issuance and therefore an influx of deals is still not expected to commence in the immediate future.

The coupon on Fonterra's (A+/AA-) debut in the Dim Sum market – which was also the first such bond to be placed by an Australasian corporate issuer – was tightened by 10 basis points on the back of nearly six times oversubscription, sources familiar with the deal say. While transaction size was limited by the scale of Fonterra's mainland China operations, the issuer expects the market to grow substantially in the coming years.

FlexiGroup has issued a A$133 million (US$140 million) asset-backed securities (ABS) transaction supported by a pool of consumer loans made by its Certegy Ezi-Pay division. The deal, Flexi ABS Trust 2011-1 (Flexi 2011-1), is the first large-sized securitisation of retail receivables in Australia since the financial crisis, although there have been two auto loan-based issues this year.

With most offshore markets remaining on hold for Australian corporate borrowers the most significant recent development has been the pricing – by Sydney Airport Finance Company (Sydney Airport) (BBB/Baa2/BBB) – of the first post-crisis Maple bond by an Australian non-bank corporate issuer. Intermediaries say the Maple funding option may prove fruitful for further corporate borrowers, with Sydney Airport having obtained attractive pricing on its deal.

Domestic credit issuance has been relatively subdued in recent weeks, largely as a result of ongoing offshore volatility. But intermediaries remain confident that the Australian markets will remain sheltered from any global instability and resumed deal flow should be straightforward once conditions settle.

The South Australian Government Financing Authority (SAFA) (AAA/Aaa) has confirmed that its funding requirement for the 2011/12 financial year will be A$3.7 billion (US$4 billion). The borrowing programme is significantly lower than the A$5.6 billion requirement for 2010/11, as the larger than expected state budget deficit has required the semi-government to restrain its planned spending.

On June 15, Council of Europe Development Bank (CEB) (AAA/Aaa/AAA) launched and priced a tap of its September 2014 Kangaroo line, with a volume of A$150 million (US$160.4 million). A day later the supranational increased the top-up by A$50 million, bringing the total size of the increase to A$200 million and the total in the line to A$1.2 billion.

European Investment Bank (EIB) (AAA/Aaa/AAA) priced a A$350 million (US$368.3 million) increase to its August 2019 Kangaroo on June 16. The tap adds to a line which was introduced in July 2009 and now has A$3.45 billion outstanding, and is set to become EIB's second Kangaroo transaction within a month following a three-month absence.

On June 16, Westpac Banking Corporation issued a new A$2.2 billion (US$2.3 billion) residential mortgage-backed securities (RMBS) transaction. The deal, which was upsized from a launch volume of A$1 billion, is Westpac's second RMBS of the year after the bank reopened the asset-backed market for the big four Australian banks with a A$1 billion issue in February.

High-grade and international issuer activity dominated the Australian market this week, with Bank of New Zealand (BNZ)'s (AA/Aa2) covered bond the most eye-catching deal to close. There was also activity in the Kangaroo market from issuers in the supranational, sovereign and agency (SSA) sector, including a deal from a less-frequent borrower, while domestic credit issuance remained quiet.

The Province of Ontario (Ontario) (AA-/Aa1) completed a A$225 million (US$239.3 million) increase to its September 2020 Kangaroo on June 10. The line was inaugurated in September 2010 at a size of A$275 million with these two transactions remaining the only Australian deals to be placed by a Canadian province since Ontario itself last issued a Kangaroo bond in November 2006.