News
On March 22 Westpac Banking Corporation (Westpac) (AA/Aa1) completed its offer to buy back up to the total volume of its March 19 2012 government-guaranteed bonds, with the bank retiring a total of A$1.5 billion (US$1.5 billion) of the original A$3.6 billion outstanding in the line. The buyback was offered at a price of 10 basis points below swap and bank bill swap rate.
The Australian market has seen a significant boost in the past week with three asset classes which have been relatively quiet so far in 2011 – the true corporate sector, covered bonds and financial institution (FI) Kangaroos – all seeing deal flow. Market participants are now focusing on how much momentum for diversity of supply will be generated by these transactions, with most believing the corporate market remains the heaviest bid.
On March 18, ME Bank priced the second Australian securitisation transaction of the week and the first in the domestic market, completing a new A$1 billion (US$995.8 million) residential mortgage-backed securities (RMBS) deal. The deal - which was upsized from a launch volume of A$599 million - follows the A$841.9 million-equivalent asset-backed securities (ABS) transaction issued by Macquarie Leasing which contained six US-dollar denominated senior tranches.
The return of Canadian Imperial Bank of Commerce (CIBC) (A+/Aa2, with covered bond programme ratings of AAA/Aaa/AAA) to the Kangaroo covered bond market has extended the duration of the asset class in Australia, with the bank pricing a new A$700 million (US$701.8 million) five-year transaction on March 11. The two previous post-crisis Kangaroo covered bonds have both been three-year deals.
The first Australian asset-backed securities (ABS) transaction of 2011 has been completed, with Macquarie Leasing pricing a new deal predominantly comprising six US dollar-denominated senior tranches alongside smaller Australian dollar pieces. The A$841.9 million (US$843.3 million) equivalent transaction was upsized from a launch volume of A$567 million, and makes Macquarie Leasing the first Australian securitiser to bring two US dollar deals since the financial crisis.
For the second year running, J.P. Morgan Chase (A+/Aa3/AA-) has launched the first unsecured financial institution (FI) Kangaroo deal of the year, with the bank pricing a new A$600 million (US$604.6 million) five-year transaction on March 9. The same issuer reopened the benchmark FI Kangaroo market post-crisis with a A$1 billion (US$1 billion) five-year deal priced on March 4 2010.
Woolworths (A-/A3) priced a new five-year domestic bond deal on March 7, the same day as launch, in the issuer's first transaction in the domestic market since 2006. The deal priced at 105 basis points over swap, 5 basis points inside its indicative margin, and with volume of A$500 million (US$506.1 million).
The liquidity of supranational, sovereign and agency (SSA) Kangaroo bonds continues to be a hot topic in the wake of the asset class's non-inclusion in the Australian Prudential Regulation Authority (APRA)'s recent determination on liquid assets. The two largest SSA Kangaroo borrowers believe the turnover in their Australian dollar paper – even during the financial crisis – is the equal of all but the highest volume-issuing semi-governments.
On March 3, Commonwealth Property Office Fund (CPA) (A-/A3) completed a partial buyback of its June 2011 maturity and simultaneous new A$200 million (US$203.1 million) five-year fixed rate issue. The buyback reduces the original volume of A$140 million on issue in the fixed rate tranche by A$107.5 million, and the A$60 million of floating rate paper by A$50.5 million.
The Royal Bank of Scotland Australia Branch (RBS Australia) (A+/Aa3/AA-) issued a new A$1.7 billion three-year dual-tranche domestic bond on March 3, which was upsized from a launch volume of A$500 million. The issuer visited the Australian market twice last year when it inaugurated a A$1.5 billion (US$1.5 billion) dual-tranche line in August and subsequently increased the fixed rate piece by A$300 million one month later.
Market response to the Australian Prudential Regulation Authority (APRA)'s determination that no asset classes will qualify as level two assets for liquidity coverage ratio (LCR) purposes in Australia has been mixed, with a small immediate pricing impact and divided opinions on the prospects for covered and Kangaroo bonds' eventual inclusion.
The Kangaroo covered bond market could see a leap in issuance in 2011 with supply expected to come from a similar range of borrower jurisdictions as has been seen in the US, according to HSBC Bank (HSBC). At a covered bond forum the bank hosted in Sydney on February 23, it predicted Kangaroo issuance for the current year could reach A$12 billion (US$12.2 billion), up from A$750 million – in a single deal – in 2010.