News

The government guaranteed March 2015 bond priced by ING Bank Australia (ING Australia) (A+) on February 18 was capped at A$2 billion (US$1.79 billion) with significant oversubscriptions on the back of heavy demand for the soon-to-disappear guaranteed asset class. The deal was for A$1 billion each of fixed and floating rate paper with pricing of 33 basis points over swap and bank bill swap rate respectively.

The Australian Securities Exchange (ASX) is active in moves to develop Australia's listed bond market for both sovereign and corporate issuers according to the exchange's managing director and chief executive, Robert Elstone. It is also hopeful that the federal government will eventually decide to facilitate retail access to sovereign debt and that this will, in turn, help pave the way for corporate issuance.

The increase to Kommunalbanken Norway (KBN)'s (AAA/Aaa)'s February 2013 floating rate notes (FRNs) that priced on February 10 priced at 35 basis points over the bank bill swap rate (BBSW), compared with 43 basis points over BBSW when the line was inaugurated on January 28.

Concerns over eurozone sovereign risk have affected relative valuation of supranational, sovereign and agency (SSA) Kangaroo bonds but market participants say the pricing moves have not come accompanied by major secondary flows. And with European Investment Bank (EIB) (AAA/Aaa/AAA) insisting it will not be used as the funding vehicle for any European sovereign bailouts, there are also hopes that market jitters will calm.

A new Kauri deal priced by Nordic Investment Bank (NIB) (AAA/Aaa) saw Asian investors accounting for over a third of the book despite slowing markets ahead of the Chinese new year holiday. The February 12 transaction was for NZ$150 million (US$104.55 million) in a new February 2014 line and was lead-managed by ANZ and BNZ.

Following a subdued start to the domestic market in 2010, ANZ Banking Group (ANZ) (AA/Aa1) issued the first Australian benchmark deal of the year on February 11 with the issue of A$1.8 billion (US$1.6 billion) of fixed and floating rate, unguaranteed four year paper. The issuer says it is well ahead of its funding task for the financial year and may take opportunities to commence pre-funding for 2010/11.

The Annual Superannuation Bulletin released by the Australian Prudential Regulation Authority (APRA) on February 10 strongly suggests that the level of local superannuation funds allocated to Australian fixed income dropped significantly in the 2008/9 financial year. The fall was caused by declining asset value and a slightly reduced default allocation to domestic fixed income.

ME Bank (BBB/A2) completed an A$500 million (US$437.5 million) government guaranteed medium term note (MTN) deal on February 10, with the issuer downplaying the significance of the recent announcement of the guarantee's impending withdrawal. Buoyed by its recent success in the residential mortgage-backed security (RMBS) market, ME Bank says its funding position is secure and the latest deal was part of its wider strategy rather than a move to secure guaranteed funds while available.

The latest re-entrant to the Australian residential mortgage-backed securities (RMBS) market, Bank of Queensland (BOQ), says it is under no pressure to source additional government guaranteed funding before the withdrawal of federal support on March 31. With A$850 million (US$737.04 million) in hand from the February 9 RMBS and only one maturity in 2010, while BOQ says it is in a position to choose its funding options on their merits.

A trio of transactions from issuers in New Zealand's power sector illustrates an awakening in the country's power infrastructure spending, lead managers say. Retail deals from TrustPower (unrated) and Meridian Energy (Meridian) (BBB+) have both closed in the past two weeks, having raised a combined NZ$340 million (US$233.75 million), while Mighty River Power (Mighty River) (BBB+) added NZ$100 million in a rare institutional-only transaction settling on February 11.

In the wake of its return as a Kangaroo and Kauri issuer, the World Bank (AAA/Aaa/AAA) has reaffirmed its strategic commitment to the growing Australian market and expressed satisfaction at the development of opportunities in New Zealand. On February 3 the World Bank sold a A$1.5 billion (US$1.3 billion) Kangaroo and a NZ$300 million (US$205.95 million) Kauri in its first Australasian transactions of 2010.

The Australian government is confident that the country's smaller banks will be able to fund themselves subsequent to the withdrawal of the guarantee on bank funding, which federal treasurer, Wayne Swan, said will occur on March 31. While the domestic big four banks have already moved away from guaranteed funding, the market for unguaranteed paper from lower-rated Australian financial-institutions (FI) has yet to reopen.