News
Dealers across Australian dollar fixed-income markets neared or reached holding limits in Q2, further drying up liquidity that has been shallow all year. While trading volume is nearing financial crisis lows, market participants say clarity on rates and inflation could see a swift rebound – particularly in investment-grade credit – as investors hunt for bargains.
The Kauri market’s resilient domestic bid and positive US dollar swap basis conditions supported World Bank’s latest New Zealand dollar Sustainable Development Bond deal. The same factors are making Kauri issuance possible at a time when Kangaroo supply has been severely limited.
John Deere Financial noted solid interest for its latest Kangaroo deal, recording a peak order book over A$700 million. The solid result was achieved despite soft offshore demand, according to deal sources.
A specific demand opportunity brought New South Wales Treasury Corporation back to fixed-rate syndicated issuance and is likely to remain a key driver of issuance strategy in what the issuer expects to be a protracted period of market challenges. The agency found robust demand for its 2033 tap, which printed volume of A$1.5 billion (US$1 billion) on 20 July.
RedZed took a pragmatic approach to achieve the volume target for its latest public residential mortgage-backed securities transaction. The issuer says willingness to compromise on initial price guidance allowed it to draw investors into the book and print at a level that worked for both sides, even in a securitisation market that is facing growing headwinds.
South Australian Government Financing Authority struck out on its own on 12 July, syndicating a tap to its May 2036 fixed-rate benchmark – defying recent semi-government issuance dynamics, which have seen limited syndicated supply and a floating-rate focus. The borrower says higher yield on the tap attracted a wide book of investors.
Covered bonds represented better value over senior-unsecured issuance for Westpac New Zealand’s 7 July euro deal. The issuer targeted investor demand for shorter tenor and fixed-rate product, a strategy that deal sources say was key to de-risking execution.
With uncertainty in global funding conditions almost certain to persist, some of the most prominent issuers in the Kangaroo and Kauri markets talk to KangaNews about their programmes and what comes next – including the ever-growing role of sustainable finance.
New South Wales Treasury Corporation targeted bank balance sheet investors with its latest floating-rate offering, noting the format was the ideal option for issuing into a more volatile market. The issuer says it wants to add new lines in future but will also focus on adding liquidity to existing ones.
Ampol’s latest hybrid deal features an innovative structure that integrates sustainability-linked features while keeping 50 per cent equity credit – a feat the lead manager says a rated issuer has not previously achieved. Issuer and lead say strict alignment with the Sustainability-Linked Bond Principles was not a priority as this is a bespoke transaction sold to just a few investors.
BNZ identified a narrow window of market stability to revisit its euro covered-bond programme on 21 June, finding strong demand across Europe for the five-year mortgage-backed deal. The covered product was an obvious choice for the volume the issuer sought as ongoing market turbulence makes senior-unsecured pricing less attractive, deal sources say.
National Australia Bank pre-placed the senior notes of its latest residential mortgage-backed securities deal and added a green tranche to smooth deal execution. The transaction is the first of its type from a major Australian bank this year and further evidence major-bank funding programmes are normalising, according to deal sources.