News

The first Australasian covered bond, issued by Bank of New Zealand (BNZ) (AA/Aa2, with an issue rating of Aaa/AAA) on June 14, has been met with a positive response from the domestic investor base at which it was targeted. With some fund managers able to hold covered bonds outside their normal limits to unsecured bank paper there are also hopes the BNZ trade will soon be followed by more covered bonds in New Zealand.

There are indications that the Australian market is picking itself up off the canvas, with a small flow of primary market issuance, well-received budgets from the two biggest state borrowers and positive Chinese economic data all boosting confidence in the week to June 11. One semi-government, two supranational, sovereign and agency (SSA) Kangaroos and a big four bank have completed deals this week.

On June 9 European Investment Bank (EIB) (AAA/Aaa/AAA) announced that its funding volume target for this calendar year has been revised down to €70 billion (US$84 billion), from the previous projection of €80 billion. Eila Kreivi, head of funding for the Americas and Asia Pacific at EIB in Luxembourg, says the lower funding volume is a result of revised lending plans for EIB's clients this year and supports the supranational's contention that it will not be called upon to fund any sovereign bailouts.

On June 9 KfW Bankengruppe (KfW) (AAA/Aaa/AAA) was the first issuer to bring a Kangaroo deal in over five weeks when it priced a A$250 million (US$209.4 million) tap of its May 2015 bond. And although the funding cost of the latest Kangaroo deal ended up being on a par with the German agency's global funding level target, Klaus-Peter Eitel, vice president in capital markets at KfW in Frankfurt, highlights the difference between funding in the euro market and the US dollar and Australian dollar markets.

Substantial pre-funding by New South Wales Treasury Corporation (TCorp) (AAA/Aaa) in the 2009/10 financial year – thanks to what the agency calls "a lower than forecast client net new funding requirement and favourable funding market opportunities" during the year – have helped keep its funding requirement for 2010/11 in line with that of 2009/10.

The Kiwis showed the Australian market how it's done this week, with the pricing of the first New Zealand bank covered bond prompting some bond-envy on the Australian side of the Tasman Sea. Meanwhile, KangaNews tracked a Korean agency looking to visit the Aussie market and talks with a brace of Nordic SSAs about how global investors are differentiating within their sector by strongly supporting their USD deals.

Moody's Investors Service and Fitch have assigned provisional long-term ratings of (P)Aaa/AAA to the mortgage covered bonds  proposed to be issued by Bank of New Zealand (BNZ) under a NZ$3 billion covered bond programme. The cover pool will comprise NZ$521,777,333 of residential assets, with a weighted-average seasoning of 25 months and a remaining term of 275 months. The weighted-average loan to value ratio is 44.8 per cent.

Bank of New Zealand (AA/Aa2) (BNZ) has signed programme documentation for New Zealand's inaugural covered bond. Moody's Investors Service and Fitch will release their rating reports on the debut issue tomorrow. Transaction details are under wraps until then, but the bonds will be issued in structured format as the Reserve Bank of New Zealand (RBNZ) has yet to finalise legislation for the product.

Export-Import Bank of Korea (A/A2/A+) (Kexim) will be visiting Australian investors from June 7 to 10 on a non-deal roadshow via Deutsche Bank, RBS Group Australia and UBS Investment Bank. Kexim, which is owned by the government of Korea and provides export credit and guarantee programmes to Korean businesses, will be the second Korean financial institution to appear in the Australian market this year.

In spite of some aggressive moves in the bills-Libor basis swap towards the end of last week and another quiet week in the vanilla primary market, developments so far this year in the euro-Aussie, AUD Uridashi and Kangaroo markets indicate that appetite for AUD-denominated product remains strong. Volume data reveals steady issuance volumes in the Uridashi market, but a strong performance from Kangaroos and euro-Aussies shows all-international issuance in Aussie dollars this year – totalling almost A$31.5 billion (US$26.3 billion) by May 27 – is on track to surpass the 2009 full-year volume of just over A$42 billion.

The first residential mortgage-backed securities (RMBS) trade in the New Zealand market since 2007 has been launched by NZF Group. The NZ$100 million (US$66.5 million) NZF Mortgages 2010-1 Trust - the first RMBS issue sponsored by NZF HomeLoans Limited – will be offered across three public tranches.

The Australian Office of Financial Management (AOFM) has been instrumental in driving another change in the residential mortgage-backed securities (RMBS) market which it hopes will bring about lower pricing in the primary RMBS market. The debt management agency hopes that this will in turn further support competition for residential mortgage lending and support lending to small business. The debt management agency has introduced this strategy via its participation in the upcoming A$500 million (US$407 million) RMBS deal launched by Suncorp Bank (Suncorp) (A/A1/A+) on May 25.