News

Western Australian Treasury Corporation (WATC) (AAA/Aaa) will raise total funds of A$8.9 billion (US$7.3 billion) in 2010/11. The funding agency for the state of Western Australia (WA) announced its new funding programme today, a day after the state's stronger-than-anticipated budget numbers were unveiled. On May 20 WA posted a surplus of A$286 million in 2010/11 and forecast the state economy to grow 3.75 per cent in 2009/10, with growth set to accelerate to 4.5 per cent in 2010-11 and 4.75 per cent in 2011/12.

With primary vanilla issuance at a virtual standstill for the third week in a row, intermediaries say secondary market activity has also slowed significantly with a lack of action on the buy and sell sides. However, confidence in Australian assets remains high with reports of offshore flows into local sovereign and semi-government paper even as the Australian dollar has experienced notable downward pressure. And market participants report continued demand for supranational, sovereign and agency (SSA) Kangaroos from Asian investors.

Following New Zealand's national budget on May 20 the New Zealand Debt Management Office (NZDMO) reiterated its interest in returning to the inflation market and its belief that demand for its linker product would be sufficient to make such a return. But it has yet to firmly commit to the market, saying only that it is "actively considering" issuing inflation product.

Investec Bank (Australia) has launched its first Australian asset-backed securities (ABS) deal, at a size of A$240.7 million (US$211.1 million). The motor vehicle and equipment receivables transaction, Impala Trust Series 2010-1, will offer class A and class B notes to the market with the remaining four tranches of notes being held by the issuer.

Bullish economic projections released by the Australian government at the same time as the federal budget for 2010/11 have not yet been enough to spur a return to local primary market issuance. And while some market sources say new deals may be forthcoming in the near future as short-term volatility settles down, most also believe that risk appetite has been set back several steps by sovereign concerns.

Global demand for Australian Commonwealth government securities (CGS) has not been weakened by the developed market sovereign debt malaise according to the Australian Office of Financial Management (AOFM). With the domestic economy continuing to outperform, the debt management agency says it is confident it can complete its stable funding task for the 2010/11 financial year.

May 11 was a significant day for the development of retail corporate bonds in Australia, with the federal budget once again expressing government support for the market and adding a small tax incentive for investments. On the same day, the Australian Securities and Investments Commission (ASIC) published the results of its retail bond consultation and the updated version of its simplified prospectus regime for issuers.

For the third consecutive week, issuance markets in Australia and New Zealand were quiet as European sovereign debt concerns intensified and risk aversion took hold among global investors. However, there continue to be signs that – notwithstanding the explosive international volatility – confidence in domestic assets remains reasonably robust.

A low-doc predominant residential mortgage-backed securities (RMBS) deal was launched by Resimac on May 5, with the issuer saying it has been exploring a trade for the past year. Premier Series 2010-1 Triomphe Trust (Premier 2010-1) is the first new mainly low-doc offering in almost two years, with 69.9 per cent of the loans in the pool being low-doc and the balance full documentation.

Having updated investors in New Zealand and offshore on April 30, Telstra (A/A2/A) launched a Kauri deal on May 3 with the material details of the transaction in line with expectations. The issuer is seeking a minimum of NZ$100 million (US$72.8 million) with room to upsize to a maximum volume of NZ$250 million in a deal which is expected to price on May 6.

ANZ and the New Zealand Exchange (NZX) hope the new Local Authority Bond (LAB) Index launched on April 29 will become a benchmark for fixed interest investments in the local authority debt market. While investors say the index could be a useful information tool, the current setup of the market – with deal sizes often too small for inclusion in the index – means its adoption is likely to be a work in progress.

A denuded issuance week to April 30 was marked more by what did not happen in the Australian market than what did. With minimal domestic deal flow – by April 30 the week looked set to become the slowest for issuance in Australia so far in 2010 – investor attention was focused on three local corporates closing in on offshore transactions.