KULUPPUARACHCHI I think there is a misconception that senior and tier-two liquidity is comparable. Bank senior, across Australian and US dollars, is the most liquid sector of the Australian credit market. It is not uncommon to see as much as US$1 billion of bank senior paper trade in a week. Tier-two liquidity is more in the realm of US$100-200 million a week in stable markets.

What we have seen with the recent wave of tier-two deals is that new issuance has acted as a catalyst for renewed interest in secondary lines among customers. This has created a decent level of activity but at the same time the sizes still pale in comparison with senior bank paper.

Also, dealer inventory is light in tier-two. We have recently seen dealers clear out their inventories on the back of new issuance. Hopefully, corporates will re-enter the debt market in the not-too-distant future and this will provide another catalyst for renewed interest among investors.

REID Liquidity is more constrained but, to some extent, we are generally looking for smaller size. I would say there is proportionally greater variation in landing size versus expectation in tier-two than senior debt. Our recent trade surprised to the upside in the scale of demand, however our previous trade was a touch disappointing.

This was a concern at the time given we will continue to have an ongoing requirement for subordinated debt and we would like to place as much as we responsibly can in the Australian market.

In regard to price, the margin progression process for tier-two is more dynamic than in senior debt: we can build a book and respond to the volume of demand to a greater extent.

In senior, we historically started roughly within 3 basis points of where we expected to finish. With tier-two we can start a bit wider than where we hope to land, have good conversations with investors and work through the interest and thoughts on price breaks. Execution in tier-two might be slightly riskier than in senior but the dynamic is very different. It also goes back to our views on reverse enquiry, which is more important in tier-two than senior debt.

BISHOP We already have emission reduction targets in our long-term climate plan, ultimately to achieve net zero emissions by 2050. We are proactively undertaking several transport initiatives including electric buses, trains and ferries, cycleways, busways and our city rail link project – which is undergrounding the train network in central Auckland. A number of these initiatives will be funded through our green-bond programme.

RAMOS Yes, definitely. NAB [National Australia Bank]’s recent tier-two deal suggested we were finally getting something the market wanted. We hoped the trade would go well and breathe some life into what we can all agree has been a challenging year – and it did. It allowed ANZ [Banking Group] to follow up with its tier-two deal the following week, which also went very well.

Right now the market is definitely not ‘risk on’ but tier-two issuance is at least a sign that things are feeling better – the best they have felt since very early this year. Investors that have worn a lot of pain have finally taken the leap, taken on some risk and got set in size, which is really important.

The most recent senior transaction from CBA [Commonwealth Bank of Australia] – the three- and five-year combo – also showed movement in appetite for duration. Approximately 50 per cent of financial issuance this year have been in the three-year part of the curve. The CBA trade was essentially a 50-50 split between three and five years, so we are finally seeing investors happy to move away from the defensive part of the curve and resume mid-curve appetite.

The secondary market is also feeling healthier in general due to primary issuance having a positive knock-on effect, not just for tier-two but across the capital stack. This is why we feel more positive than we have this year so far. But clearly we are not out of the woods yet.

KULUPPUARACHCHI The CLF [committed liquidity facility] created a natural demand for floating-rate notes [FRNs] from bank balance sheets, and as the facility is unwound we are seeing this interest dissipate and the market go back toward fixed.

There is a preference for fixed offshore as well – in fact, corporates find it very difficult to issue FRNs because doing so shuts out some investors in Asia. There is definitely a bias toward fixed and we believe fixed-rate can outperform FRNs over the medium-to-long term.

REID We want to be fair to all our investors. If we are offering fixed and floating tranches simultaneously it is very difficult not to price them at the same margin. We could ask whether a fixed-rate-only version of our recent Australian dollar trade would have priced tighter; secondary performance suggests it would have.

We are broadly agnostic between fixed and floating demand, but we size our deals for demand. Our recent fixed-rate tranche was a lot bigger than the floating-rate tranche, reflecting the additional demand for fixed-rate bonds.