Like the Canadian provinces, EDC has experienced a step-change in the volume it can print in the Kangaroo market. After a nearly four-year absence, it returned in 2023 with a A$1 billion five-year offer that was a record volume for the issuer. Since then, it priced two more deals of equal size with tenor of 4-6 years.

“We want to show our commitment to the Australian dollar market and to liquidity,” comments Chadrick Buffel, EDC’s Ottawa-based assistant treasurer. The goal is to bring EDC’s credit curve back while providing Kangaroo investors an opportunity to access Canadian government risk and exposure.

EDC’s federal government ownership means it is the only avenue for investors to gain Canadian government exposure in Australian dollars. But this also means it prices tighter than the provinces, domestically and in international markets. EDC tends to mark itself closer to the likes of World Bank and KfW Bankengruppe.

Nevertheless, like the provinces, relative value has played an important role in attracting demand to EDC’s Australasian deals. Buffel tells KangaNews: “We offer a pickup from semi-government issuers while also being a high-quality asset. If we were pricing just like the Australian semi-governments, domestic investors would ignore us. Consequently, there will and must be a pickup for them. How big the pickup is varies depending on demand.”

EDC also supplies different parts of the curve from the provinces. Specifically, it typically targets the mid-curve while all four provincial deals in 2024 have been at the longer end.

It also has a chance of offering supply on a more consistent basis. “There will be times at which cross-currency swaps back to Canadian dollars are too costly for the provinces but where EDC’s natural Australian dollar asset exposure allows it to keep printing,” says Susan Love, treasurer at EDC in Ottawa. In other words, EDC does not need to wait for the arbitrage to work for Kangaroo issuance to be cost-effective. This flexibility is helpful for EDC’s commitment to being a programmatic issuer across its funding options, Love explains.

Whatever the differences, EDC also identifies a groundswell of interest for Canadian credit in Australian dollars. Buffel says investor engagement has been “phenomenal” compared with the pre-pandemic experience. “It’s almost like it’s a different market,” he comments, noting in particular the increase
in interest out of Asia.

Depending on underlying economic conditions next year, uptake of Canadian credit may not be as robust as it has been so far in 2024. However, Buffel does not anticipate a complete reversal. “I don’t believe we’ll be going back to the days where A$1 billion dollars isn’t achievable,” he tells KangaNews. “It used to be very hard to get to this volume level, where now most of the mechanisms are in place to do so. There may become fewer funds at some point and competition might increase – but the latter tends to help us out as well."