Activity review: the rapid rebound
Australian and New Zealand issuance trends in H1 2023 largely shook off ever-tighter policy conditions and consistent event risk, with several sectors producing year-to-date record primary market outcomes. With notable exceptions – such as the ongoing lack of momentum in Australian true corporate issuance – the biggest surprise of all may be the markets’ resilience to shocks.
Kathryn Lee Senior Staff Writer KANGANEWS
Sectors in the Australian market that recorded all-time high first-half volume were as disparate as major-bank tier two (see p12), supranational, sovereign and agency (SSA) Kangaroos, and the domestic securitisation market (see charts 1 and 2). These outcomes demonstrate the broad nature of demand.
The issuance wave happened despite what seemed for a time to be potentially market-changing event risk in March. The fall of Silicon Valley Bank (SVB) and Signature Bank in the US, followed by Credit Suisse a few days later, briefly seemed likely to plunge capital markets back into paralysis – and potentially to spark a full-blown liquidity crisis.
Most vanilla credit sectors in the Australian dollar debt market, however, barely missed a beat. The majority of market segments resumed issuance in good order after the banking sector convulsions, often going on to double their previous volume (see chart 3). There was almost no sign of investor wariness in the financial sector. For instance, Australia’s big-four banks printed A$26.8 billion in their domestic market in H1 2023 – almost exactly the same volume as in both halves of the record-breaking 2022 (see chart 4).
Issuance in 2023 continued to pile records for major-bank transaction size on top of one another, with the top two senior deals and two of the top five largest tier-two prints completed this year – in both cases with the all-time record deals coming to market after the collapse of SVB and Credit Suisse (see tables 1 and 2).
TABLE 1. TOP FIVE LARGEST AUSTRALIAN BIG-FOUR BANK DOMESTIC SENIOR TRANSACTIONS
| Date | Issuer | Volume (A$m) |
|---|---|---|
| 4 May 23 | National Australia Bank | 5,250 |
| 9 Jan 23 | Commonwealth Bank of Australia | 5,000 |
| 27 Oct 22 | ANZ Banking Group | 4,750 |
| 22 Nov 22 | National Australia Bank | 4,750 |
| 10 Aug 22 | Commonwealth Bank of Australia | 4,500 |
Source: KangaNews 10 July 2023
TABLE 2. TOP FIVE LARGEST AUSTRALIAN BIG-FOUR BANK DOMESTIC TIER-TWO TRANSACTIONS
| Date | Issuer | Volume (A$m) |
|---|---|---|
| 19 Jun 23 | Westpac Banking Corporation | 2,900 |
| 27 Oct 22 | Commonwealth Bank of Australia | 2,000 |
| 19 Jul 19 | ANZ Banking Group | 1,750 |
| 3 Aug 22 | ANZ Banking Group | 1,750 |
| 6 Mar 23 | Commonwealth Bank of Australia | 1,750 |
Source: KangaNews 10 July 2023
The securitisation market benefited from a rebound in demand especially from international investors, with multiple issuers and arrangers commenting on improved liquidity conditions and a reduced need for joint lead manager support in public deals.
Indeed, while nonbanks continued to dominate supply (see chart 5), by late in the first half some market users were ready to predict a rebound in bank issuance especially from outside the big four. Banks priced A$3.5 billion of securitised deal flow in H1 2023, including benchmark deals from AMP Bank, HSBC, Suncorp-Metway and Great Southern Bank.
The most disappointing sector in Australia was true corporate issuance, which seems to have been most affected by event risk and more general concern about economic trajectory. Telstra Group opened the market with a five-year trade on 1 March, which offered the promise of a rebound in new issuance after corporate borrowers largely turned to their banks for their debt needs in 2022.
In the end, A$4.3 billion of new corporate supply priced in Australia in the first half – a slight improvement on last year and in line with historical volume, but far from a return to the most conducive years of 2017 and 2021 (see chart 6). The problem, as is often the case, seems to be availability of tenor: corporate treasurers remain unwilling, in the main, to rely on the Australian dollar market for 10-year liquidity or even, in many cases, for seven years.
While syndicated issuance does not tell the full story of semi-government supply, Australia’s states and territories also executed large prints in H1 2023. Treasury Corporation of Victoria and Western Australian Treasury Corporation priced their largest-ever fixed-rate syndications while New South Wales Treasury Corporation completed its equal-largest syndicated floating-rate note issue (see table 3).
TABLE 3. AUSTRALIAN SEMI-GOVERNMENT ISSUER RECORD SYNDICATIONS
| Issuer | Largest fixed-rate syndication | Largest FRN syndication | ||
|---|---|---|---|---|
| Pricing date | Volume (A$m) | Pricing date | Volume (A$m) | |
| Australian Capital Territory | 8 Apr 23 | 1,325 | N/A | N/A |
| New South Wales Treasury Corporation | 27 May 09 | 2,550 | 13 Sep 21 | 4,000 |
| Northern Territory Treasury Corporation | 21 Feb 20 | 700 | N/A | N/A |
| Queensland Treasury Corporation | 21 Jan 10 | 4,000 | 23 Aug 22 | 2,500 |
| South Australian Government Financing Authority | 13 Feb 20 | 1,750 | 19 Feb 14 | 1,500 |
| Tasmanian Public Finance Corporation | 15 Jul 10 | 750 | 3 Jul 22 | 500 |
| Treasury Corporation of Victoria | 21 Jun 23 | 2,750 | 2 Jun 22 | 4,400 |
| Western Australian Treasury Corporation | 8 Jun 23 | 1,900 | 30 Nov 20 | 1,530 |
Source: KangaNews 10 July 2023
RETAIL THERAPY
Throughout H1 2023, the retail component of New Zealand’s market supported steady credit issuance even as the Australian market faltered. Even as global markets were still absorbing the SVB developments, Kiwi Property Group was able to push ahead with a deal launch, eventually pricing a transaction on 17 March. Ultimately, New Zealand’s corporate market experienced its second-highest H1 volume in a decade (see chart 7).
Issuance trends in the wholesale-dominated sectors of the New Zealand dollar capital market were unspectacular, though. H1 2023 saw two domestic major bank senior transactions for a total NZ$1.5 billion (US$923.7 million) – largely in line with typical issuance volume (see chart 8).
The New Zealand dollar securitisation market had little opportunity to build on 2022’s breakthrough new-issuance year. Resimac’s transaction, priced in June, was the only public residential mortgage-backed securities (RMBS) deal to come to market in New Zealand in H1 2023, though there is still confidence of future growth in the local nonbank sector in particular.
The SSA Kauri market managed reasonable H1 volume, of NZ$4 billion (see chart 9), despite regulatory headwinds from the Reserve Bank of New Zealand’s ongoing liquidity policy review. The signs in January and early February were positive, with good-sized deals from Inter-American Development Bank, World Bank and Nordic Investment Bank (NIB). Shortly after NIB’s 3 February deal, however, a second consultation paper for the RBNZ’s review put the market on hiatus.
Issuance eventually restarted but typically at shorter tenor (see table 4). For instance, World Bank’s bumper NZ$950 million Sustainable Development Bond in mid-June was the supranational’s first-ever three-year Kauri tenor. Only two of the transactions to price after the release of the second consultation in February came to market with duration of more than three years.
TABLE 4. SSA KAURI TRANSACTIONS H1 2023
| Date | Issuer | Volume (NZ$m) | Tenor (years) |
|---|---|---|---|
| 12 Jan 23 | Inter-American Development Bank | 375 | 7 |
| 18 Jan 23 | World Bank | 550 | 5 |
| 3 Feb 23 | Nordic Investment Bank | 700 | 7 |
| 17 Apr 23 | Kommunalbanken Norway | 300 | 3 |
| 3 May 23 | International Finance Corporation | 275 | 6 |
| 24 May 23 | Municipality Finance | 150 | 3 |
| 13 Jun 23 | World Bank | 950 | 3 |
| 20 Jun 23 | Asian Development Bank | 675 | 5 |
Source: KangaNews 10 July 2023
LEAGUE TABLE UPDATE
Meanwhile, KangaNews’s intermediary league tables for H1 2023 continue to reflect the dominant position of the domestic big-four banks in most sectors. The all-Australian dollar league table – including high-grade and credit transactions from domestic and offshore issuers, but excluding self-led deals and securitisation – has ANZ on top, maintaining a position the bank held in full-year 2022. National Australia Bank (NAB), Westpac Institutional Bank and Commonwealth Bank of Australia (CBA) round out the top four, accounting for more than half the market between them.
Focusing on domestic issuers only, NAB rises to the top of the H1 league table, ahead of Westpac, ANZ, CBA and Deutsche Bank. Last year’s Australian domestic league table saw Westpac come out top followed by ANZ, CBA, NAB and UBS.
Conversely, the Kangaroo league table provides a rare example of a sector dominated by global intermediaries: Nomura holds top spot ahead of RBC Capital Markets (RBCCM). ANZ is the only domestic house in the top five, in third, followed by TD Securities and J.P. Morgan (JPM). This is the same leaderboard composition as full-year 2022, though RBCCM topped the pile last year followed by Nomura, TD, ANZ and JPM.
The finishing order shuffles again in the Australian dollar credit sectors. Westpac is the leading house for vanilla credit issuance in H1 2023 – financial institution and true corporate deals – including international borrowers but excluding self-led deals. The bank has a 7 per cent market share lead over ANZ in second place, with NAB, CBA and UBS filling the top five spots. In securitisation, meanwhile, NAB retains its longstanding position at the top of the league table followed by Westpac, CBA, Deutsche Bank and Standard Chartered Bank.
Australia’s sustainable bond market was patchy in the first half of 2023, with good volume from the global SSA sector but very limited corporate activity. ANZ’s position as a domestic player in the SSA Kangaroo market and its strong sustainable finance credentials see it holding a comfortable position at the top of the KangaNews league table, ahead of SSA powerhouses Nomura, RBCCM and TD, with NAB rounding out the top five.
Moving to New Zealand, ANZ also sits atop the all-New Zealand dollar league table – excluding self-led deal flow – ahead of Westpac, CBA, BNZ and JPM. In 2022, BNZ finished ahead of ANZ, Westpac, CBA and UBS.
The H1 2023 picture is similar in the league table for New Zealand domestic deals only, where ANZ leads Westpac, CBA, JPM and BNZ – though the outcome is somewhat distorted by the fact that nearly half of total volume came from a single syndication by New Zealand Debt Management. The credit-only – excluding self-led volume – league table has BNZ at the top followed by ANZ, Forsyth Barr, Craigs Investment Partners and Westpac.
While the Kauri market is confronting regulatory challenges in 2023, volume has been no worse than solid. ANZ is the clear market leader as a lead manager in the sector, more than 20 per cent clear of its nearest rival, Westpac, in market share. CBA, BNZ and TD fill the second-to-fifth spots. ANZ also came top in the full-year 2022 Kauri league table, though narrowly over BNZ, with CBA, TD and Westpac also in the top five.
New issuance in the New Zealand securitisation market has been hard to come by in 2023, with just a handful of deals coming to market. Westpac is the leading intermediary for H1, BNZ and CBA the only other houses featuring.
ANZ matches its leadership in the Australian sustainable bond league table by taking top spot in the New Zealand equivalent, ahead of BNZ, Westpac, CBA and Craigs. Most of ANZ’s lead comes from sustainable Kauri transactions and it leads BNZ by just NZ$1 million of attributed league table volume in the domestic sustainable bond league table.
See all KangaNews’s up-to-date intermediary league tables at www.kanganews.com/league-tables.
