News

Interest in the Australian inflation-linked sector is growing ahead of the return of sovereign issuance, with the expected removal of non-resident interest withholding tax (IWT) on commonwealth government securities (CGS) a particular draw for international buyers. Meanwhile there are signs that domestic allocations to the inflation sector are picking up ahead of an expected increase in supply.

Seven days before the September 15 maturity of a A$1.7 billion (US$1.45 billion) Kangaroo line, Rentenbank (AAA/Aaa/AAA) increased the 2014 bond it inaugurated in July this year by A$200 million – the minimum target size for the transaction at launch a day earlier. The increase is the issuer's second Kangaroo transaction this year and brings the total outstanding in the line to A$650 million.

The A$1 billion (US$855.9 million) of four-year paper priced by Suncorp-Metway (Suncorp) (A/A1/A+) on September 8 appears to indicate a slowing down of the rapid price contraction seen over recent weeks. The deal offered A$200 million of fixed rate paper at a margin of 38 basis points over swap and A$800 million of floating rate notes at the same margin to bank bill swap rate (BBSW).

On September 8, shortly after the Australian Office of Financial Management (AOFM) made its last allocation to a residential mortgage-backed security (RMBS) deal from a bank issuer under its current support programme, Members Equity Bank (MEB) (BBB/A2) priced the first Australian RMBS not to receive government investment since October last year.

Wesfarmers (BBB+/Baa1) has priced its five-year domestic bond transaction a day after its September 3 launch, tightening the margin on the A$500 million deal to 260 basis points over swap and bank bill swap rate from the indicative level of 275 basis points over. The issuer sold A$400 million of fixed rate bonds and a further A$100 million of floating rate paper in the September 2014 maturity line.

The A$300 million (US$251.88 million) new 2014 Kangaroo line priced by Council of Europe Development Bank (CEB) (AAA/Aaa/AAA) on September 4 pushed Kangaroo issuance in 2009 to an aggregate of A$10.1 billion, just A$415 million short of the previous year's figure and on course to break 2006's all time record issuance – A$14.72 billion – from supranational, sovereign and agency (SSA) issuers.

WestLB AG Sydney (WestLB) (BBB+/A2/A-) priced the one year-plus deal it launched earlier the same day on September 3, with distribution of the A$650 million (US$541.06 million) transaction understood to have been predominantly domestic. Although the issuer also has A$500 million of bonds issued in 2004 set to expire on September 30 the new transaction is not believed to be a direct refinancing.

KfW Bankengruppe (KfW) (AAA/Aaa/AAA) has added A$200 million (US$167.58 million) to its March 2017 Kangaroo bond in the first transaction of that maturity in the Kangaroo market this year. Market sources say the increase priced at 30 basis points over swap or around 93 basis points over the February 2017 Australian government bond.

The margin of 89 basis points over swap and bank bill swap rate (BBSW) on the A$1.35 billion (US$1.13 billion) of four-year unguaranteed benchmark bond transaction priced by Commonwealth Bank of Australia (CommBank) (AA/Aa1/AA) on September 3 indicates the tightest level for a deal of this duration from a big four Australian bank issuer for nearly two years.

Council of Europe Development Bank (CEB) (AAA/Aaa/AAA) launched its second Kangaroo deal of the year on September 3, offering a new five-year maturity bond which lead managers Commonwealth Bank of Australia and TD Securities say will price "subject to market conditions". The same issuer inaugurated its 2013 Kangaroo in a A$300 million (US$250.11 million) deal on May 27 this year.

Wesfarmers (BBB+/Baa1) is seeking a minimum of A$250 million (US$208.55 million) in a new five-year domestic medium-term note (MTN) transaction it launched on September 3. The deal, which has indicative pricing of 275 basis points over swap and is expected to price by September 4, will be the issuer's first public domestic bond transaction since it sold A$250 million of three-year paper in June 2005.

Treasury Corporation of Victoria (TCV) (AAA/Aaa/AAA) priced its first ever bookbuilt transaction on September 2, capping the size of the new June 2020 line at A$1.5 billion (US$1.25 billion) a day after launch. The deal priced at 80 basis points over the April 2020 Australian government bond – towards the tighter end of the indicative range but a slight premium to TCV's existing curve.