News

First half issuance in New Zealand was steady to slow, with total primary market deal flow across the domestic and Kauri sectors of NZ$3.86 billion (US$2.63 billion) – lower, though not by far, than any of the previous four periods. Domestic issuance in the past six months has been characterised by the relative reduction in the proportion of bank bonds issued with the local government and corporate sectors increasingly prominent.

Despite ongoing volatility and the near shutdown of the market in May, the first half of 2010 saw record issuance in the Australian vanilla credit and Kangaroo markets. Total domestic issuance for the half year, including securitisation but excluding government and semi-government activity, reached A$51.17 billion (US$42.6 billion) – roughly in line with the pre-GFC norm.

Westpac Banking Corporation (Westpac) (AA/Aa1) priced a 2015 maturity domestic deal on June 29 in just the second unguaranteed five-year from a financial institution (FI) in Australia this year. The bank sold A$300 million (US$259.29 million) of fixed rate notes at 135 basis points over swap and A$500 million of floating rate paper at the same margin to bank bill swap rate (BBSW).

The five-year domestic bond issue first sounded by Sydney Airport Corporation (Sydney Airport) (BBB/Baa2/BBB) in early May, then postponed as European-centred volatility gripped the market, placed volume of A$175 million (US$152.7 million) on June 28. The transaction is part of a buyback and exchange transaction for two outstanding credit-wrapped lines from the same issuer, due in November 2011 and December 2012.

ME Bank plans to include a US dollar tranche in a residential mortgage-backed securities (RMBS) transaction it expects to price next week. No Australian issuer has sold foreign currency-denominated securitisation product since the last euro tranches were included in a deal, in July 2008, while there has not been a US dollar offering since May 2007.

With issuance emerging across sectors in the past week, market participants in Australia say the deal pipeline is building. While confidence is only starting to return and investors say caution still reigns, the first domestic bank benchmark and the first public corporate deal since April are expected to be a sign of things to come rather than a flash in the pan.

KfW Bankengruppe (KfW) (AAA/Aaa/AAA) mandated an increase to its March 2017 Kangaroo bond on June 22 in what is likely to become the third Kangaroo deal to price in two weeks following over a month with no issuance. The new transaction, which is being lead-managed by Deutsche Bank and TD Securities, will add to a line which currently has A$1.2 billion (US$1.1 billion) outstanding.

The Australian Office of Financial Management (AOFM) has rebuffed suggestions that it should extend its programme of buying residential mortgage-backed securities (RMBS) from local issuers denominated in foreign currencies. And other securitisation market users also cast doubt on claims that offshore demand for Australian product could be kick-started by such a move from the government.

For much of the week, primary markets in Australia and New Zealand offered an eerie echo of the respective nations' performance in the World Cup so far. While a powerful European-based threat has been enough to cow Australia on and off the field, New Zealand refused to submit to the European menace and fought back with a major score of its own.

On June 17 Telstra Corporation (Telstra) (A/A2) reopened the domestic corporate bond market after almost two months since the last domestic corporate deal, with a A$150 million (US$129.4 million) 10-year deal priced at 200 basis points over 10-year mid-swaps.

European Investment Bank (AAA/Aaa/AAA) has mandated ANZ, J.P. Morgan and UBS Investment Bank to lead manage what will be the third Kangaroo transaction in the past week. EIB will increase its August 2019 Kangaroo line, which currently has A$2.6 billion (US$2.2 billion) outstanding, "in the near future subject to market conditions," the leads say.

A week after the state of Queensland released its budget for the 2010/11 financial year, Queensland Treasury Corporation (QTC) (AA+/Aa1) announced a small fall in its expected funding task for the coming 12 months. There is also room for further reduction in the A$18.1 billion (US$15.4 billion) indicative borrowing programme as the projection does not account for potential asset sales or pre-funding in the remainder of June.