News

The Reserve Bank of Australia (RBA) will add A$100 billion (US$76.6 billion) to its government bond purchasing programme once the initial A$100 billion programme is completed in April. The reserve bank announced the extension following its 2 February monetary-policy meeting, also confirming that it will continue its run-rate of A$5 billion of purchases per week, split 80-20 per cent between Australian Commonwealth government bond (ACGB)s and semi-government bonds.

At A$3 billion (US$2.3 billion), Queensland Treasury Corporation (QTC)’s latest deal is the largest syndicated transaction from a semi-government borrower in a decade. The issuer says recent primary-market transactions in the government space suggested a receptive backdrop for new issuance following volatility in secondary markets earlier in the year.

Westpac Banking Corporation’s latest tier-two transaction, priced on 21 January, opened the Australian dollar financial-institution (FI) market for 2021. The issuer says lack of major-bank supply coupled with the liquidity environment is supporting broad-based demand for its tier-two transactions.

Asian Development Bank (ADB) and European Investment Bank (EIB) delivered mid-January Kangaroo deals at a tenor – 10 years – that had been missing in the new-issuance market. Deal sources say Australian dollar pricing relative to core currency markets is still too wide to encourage more widespread sovereign, supranational and agency (SSA) issuance.

Australian Unity issued Australia’s first-ever mutual capital instrument (MCI) on 24 December 2020. The A$120 million (US$93 million) perpetual security came nearly two years after enabling legislation passed in federal parliament. Adam Vise, the issuer’s Melbourne-based group treasurer, discusses the impetus for and mechanics of the transaction.

Treasury Corporation of Victoria (TCV) stepped into a quiet Australian dollar market with a new four-year syndication on 20 January. The issuer says secondary market selling that dominated market tone early in the year appears to have cleared and that issuance conditions supported a substantial book and final volume.

Australian dollar primary market syndicated supply has been muted in the first two weeks of 2021. The two traditional sources of early-year supply are largely missing, and technical factors are largely set against high-grade supply. The bright spot, intermediaries say, is that secondary market dynamics are gradually swinging in support of primary issuance.

A new survey of sovereign borrowers that have issued green, social and sustainability (GSS) bonds suggests a strong rationale for joining the market. Issuers responding to the survey, which was published by Climate Bonds Initiative (CBI) on 15 January, say their GSS programmes were relatively quick to deliver, enhanced transparency, found new investors and – in many cases – cut the cost of borrowing.

European Investment Bank (EIB) started Australian dollar deal flow for 2021 on 5 January, with a record-breaking climate-awareness bond (CAB) transaction. Deal sources say there are some new dynamics emerging which could support Kangaroo supranational, sovereign and agency (SSA) borrowers in 2021, though some of the factors which dragged on the sector in 2020 also remain.

As environmental, social and governance issues become ever-more integrated with the credit investment process in Australia, the issue of pricing consequences for strong and weak performers is more relevant than ever. This is no longer just a question for direct emitters but also for companies with business models adjacent to emissions-intensive industries.

One of the most popular annual sessions at the KangaNews Debt Capital Markets Summit is the big-four bank treasurers panel. There was no shortage of discussion topics at the 2020 videoconference iteration, even though the majors have had minimal wholesale issuance to do and there is little chance of a 2021 rebound.

After hopefully overcoming the worst of the COVID-19 pandemic, the Australian securitisation industry is taking stock of a period of resilience and a reshaped competitive landscape. Top of mind for market participants are the way crisis response has changed the cost of funding unevenly for different issuer types and mooted changes to responsible-lending rules.