Foreign currency benchmarks on the cards?
Australian semi-government issuers have long avoided forays into foreign currency benchmark issuance, though some have gradually built outstandings via private placements. While a widespread rush to offshore markets is not on the cards, occasional benchmark issuance seems more likely than it has for some time.
KELLY My answer remains as it always has been: we keep an eye out for opportunities to issue foreign currency bonds when it is appropriate. We topped up our 2050 euro line by €400 million (US$445
million) in January. Whether we’d consider a benchmark trade depends on many things, including spread.
Historically, spreads have not worked in favour of the semis being able to bring foreign currency issuance back to our domestic cost of funds.
It probably looks a little more favourable now than in the past, but for TCV [Treasury Corporation of Victoria] it probably remains more an opportunistic approach than a programmatic strategy. We will
continue to monitor markets for opportunities even as we continue to pursue Australian dollar offshore demand.
ZUVICH We always compare foreign currency options to our cost of funds. We are in a fortunate position, with the size of our programme, that we can cover what we need to do domestically so it
is not a pressing matter for us. We still look at it, but it will be some time before we need to seriously consider the offshore market.
We don't necessarily need to have equality with domestic cost of funds. We can apply an option-premium-type approach, effectively saying there is a benefit where it may not be necessary to use our local cost of funds. We are continually monitoring markets globally and we have the capacity to issue.
FAJARDO There are a number of benefits to issuing offshore in benchmark size, such as increasing the diversification of our investor base, issuing in the most liquid currencies – which can be very helpful in risk-off environments – as well as reducing supply in Australian dollars, which supports domestic spreads.
From QTC [Queensland Treasury Corporation]’s perspective, we don’t necessarily need to have
equality with domestic cost of funds. We can apply an option-premium-type approach, effectively saying
there is a benefit where it may not be necessary to use our local cost of funds.
We are continually monitoring markets globally and we have the capacity to issue since we have a US MTN programme and an EMTN programme.
KELLY If we chose to do a benchmark trade from our Reg S programme, we don’t expect it would cannibalise our Australian dollar offshore investor base. This is because euro or US dollar books are
managed independently of Australian investments, so while portfolio managers might compete for credit limit they are not competing for cash allocations. To Jose’s point, it is genuine diversification and not just a change of the existing offshore investor base.
