News

Australia’s big-four banks have attacked the levy on their liabilities proposed by the recent federal budget, describing the levy as a rushed, ill thought out, inadequately consulted piece of “bad policy”. All four majors published submissions made to Treasury on 15 May, in which they set out a raft of complaints and proposed changes to the levy.

The 11 May completion of the long-term lease of Endeavour Energy (Endeavour), the New South Wales (NSW) electricity distributor, has caused NSW Treasury Corporation (TCorp) to reduce its expected term-funding task for the current year to a A$200 million (US$146.8 million) net repayment of debt from the A$4 billion of net issuance previously forecast.

Bank of Queensland (BOQ) (A3/A-) revealed on 11 May that it has established a Reg S covered-bond programme with conditional pass-through (CPT) features. BOQ is the first Australian bank to introduce such a programme, which allows issuers at lower rating levels more efficient access to triple-A-rated covered-bond issuance.

If socially responsible fixed-income asset classes, and in particular green bonds, become a consistent component of the Australian debt market it seems likely that March-April 2017 will be looked back on as a landmark period. Issuance volume hit an all-time high, including a clutch of breakthrough and innovative transactions.

The Australian Office of Financial Management (AOFM) confirmed an expected gross Treasury bond issuance task of A$80 billion (US$58.8 billion) for 2017/18 following delivery of the Australian federal budget on May 9. The gross figure includes A$34 billion of net new issuance, while a December 2016 update forecast gross and net issuance totals of A$100 billion and A$74 billion for 2016/17.

Australia’s major banks are set to pay more for their wholesale funding – both short and long term – under a major-bank levy introduced by the 2017/18 Commonwealth budget. The government estimates the levy, which amounts to 6 basis points on all major-bank liabilities excluding additional tier-one instruments and most deposits, will raise A$6.2 billion (US$4.5 billion) over four years.

Kiwibank’s decision to pull a planned Kangaroo transaction between pricing and settlement was driven by a preliminary Reserve Bank of New Zealand (RBNZ) view that the issuer’s outstanding tier-one and tier-two securities may not comply with the local capital-adequacy regime.

The H1 2017 edition of the Fitch Ratings (Fitch)-KangaNews Fixed-Income Investor Survey has a domestic risk factor with a clear lead at the top of the agenda for Australian fund managers. The domestic buy side is increasingly concerned about the housing market, though it remains fairly confident about credit quality and spread direction.

Treasury Corporation of Victoria (TCV) has disclosed an expected funding task of A$8.3 billion (US$6.3 billion) for 2017/18, significantly up on recent years as the state government continues to focus on infrastructure investment even after the asset-sales cycle has largely played out. Analyst response to the Victoria state budget, delivered on 2 May, is broadly positive despite the increased deficit though TCV spreads widened on budget day.

Vicinity Centres (Vicinity) says all-in cost on its debut domestic transaction was very attractive even though some domestic investors reveal they sat the deal out based on sector preference and spread widening. Despite a slightly softer market backdrop, buy-side sources say they expect solid demand for corporate credit to continue.

Goldman Sachs (BBB+/A3/A) launched a seven-year deal in the Australian market on 20 April. Unlike other recent US bank issuance in Australia – including the A$1.2 billion (US$899.4 million) print by Wells Fargo & Company on 19 April – Goldman Sachs is issuing off its Kangaroo programme rather than issuing a global transaction.

Having issued two benchmark transactions in less than a month, including a debut in the Kangaroo market, Auckland International Airport (Auckland Airport) says a larger capex task will make the issuer a more frequent visitor to global markets. It highlights the extremely favourable pricing outcome it received in both Australian and New Zealand dollars and the positive tenor evolution of the Australian option.