News

Rob Nicholl, Canberra-based chief executive at the Australian Office of Financial Management (AOFM), used a 30 May speech to Australian Business Economists (ABE) to predict “a strong possibility of heightened geopolitical uncertainty” over the coming year. But he also offered insights into the AOFM’s global investor base to support his claim that the issuer is well positioned for future volatility.

Reverse enquiry spurred Westpac Banking Corporation (Westpac)’s return to the domestic covered-bond market with the first Australian dollar benchmark covered bond from a major bank this year. Westpac printed A$2 billion (US$1.49 billion) of 5.25-year covered bonds on 24 May.

KangaNews is pleased to present the results of its 2017 Fixed-Income Research Poll. This is the only independent, specialist poll of fixed-income investors' views on relevant research in the Australian market. This year marks the seventh consecutive year the poll has been running, and like the previous year 2017 broke a new record in terms of responses. More than 90 legitimate votes were received from qualifying institutional investors.

Kiwibank confirmed on May 29 that two instruments it initially issued as regulatory capital securities will no longer qualify as such, following confirmation of a preliminary view on these securities’ status by the Reserve Bank of New Zealand (RBNZ). The disclosure of the preliminary view caused angst in the New Zealand market in March as it came between pricing and settlement of a Kiwibank senior Kangaroo deal, which the issuer was forced to pull.

Liberty Financial (Liberty) printed an upsized and oversubscribed senior-unsecured transaction despite falling victim to an S&P Global Ratings (S&P) action that downgraded the issuer alongside 22 other Australian financial institutions. Liberty triggered a 50 basis points step-up built into its programme to retain investors, and says the higher margin on offer may have attracted additional bids.

Australia’s securitisation market continues to generate well bid and competitively priced transactions, with AMP Bank printing the market’s latest upsized and oversubscribed deal. The issuer highlights robust international demand throughout the capital structure as well as the pricing benefit achieved from the deal’s capital-relief structure.

For the first time in the current cycle, the New Zealand Debt Management Office (NZDMO) includes a government commitment to maintaining a minimum supply of New Zealand Government bonds (NZGBs) on issue in its latest funding update. The update, which was released on 25 May following the New Zealand budget, says the government intends to maintain minimum NZGB supply of “not less than 20 percent of GDP over time”.

Commonwealth Bank of Australia (CommBank) revealed on 25 May that it is engaging with investors on a potential self-led residential mortgage-backed securities (RMBS) transaction from its Medallion programme. A forthcoming deal will be for funding and capital-relief purposes.

Mid-curve Kangaroo market pricing has swung back into a range that some global supranational, sovereign and agency (SSA) borrowers consider to be an acceptable premium for diversification purposes, market participants say. A recent-year issuance decline shows signs of having bottomed out – though it is yet to rebound – and market users say demand for the SSA product is steadily broadening.

The Australian market moved a step closer to a formalised best practice for deal disclosure on 15 May when the Australian Financial Markets Association (AFMA)’s credit product committee released a market notice recommending guidelines to be followed by market participants. Dealers tell KangaNews market practice has substantially coalesced around the guidelines though with no enforcement power it remains to be seen whether they will be followed universally.

Institutional investors’ growing willingness to engage with unrated and other forms of higher-yielding debt supported the substantially larger volume outcome achieved by Australia’s latest returning unrated issuer, the deal’s arranger says. NEXTDC priced A$300 million (US$222.5 million) of four-year bonds on 15 May from a significantly oversubscribed book according to deal sources.

S&P Global Ratings (S&P) affirmed its triple-A rating on the Australian sovereign – with negative outlook – on 17 May. S&P’s update reflects the consensus view of analysts that the 2017/18 Australian budget largely offers fiscal continuity rather than significant consolidation or deterioration.