News
A number of submissions to Australia's financial system inquiry (FSI) include commentary and proposals on the bond market – most commonly relating to a desire to develop a larger domestic option for funding corporates and the infrastructure sector. Regulatory impediments, retail development and education, asset allocation and the tax system all come under the microscope of market participants.
The inaugural Australian Fixed-Income Investor Survey, published by Fitch Ratings (Fitch) and KangaNews on April 2, suggests Australian investors see the situation in China as the biggest risk factor to domestic credit markets over the next year. However, responses elsewhere suggest the investor base remains relatively comfortable with the state of the market, for instance predicting gradual contraction to be the prevailing credit spread dynamic.
New Zealand's Local Government Funding Agency (LGFA) has initiated the search for a new chief executive following the announcement of the forthcoming retirement of its first-ever leader, Philip Combes. Combes tells KangaNews the agency is in good shape for the future, with offshore ownership of its bonds in particular having seen a significant increase since the middle of last year.
The Australian Securities Exchange (ASX) has elected to make fixed income an important theme of its submission to Australia's financial system inquiry. In the March 31 submission, the ASX claims that the "only market where Australia underperforms currently is the fixed-income market and particularly the corporate bond market".
Australian intermediaries say the debut of First Gulf Bank could be another sign of a growing trend whereby Middle East-origin issuers seek to tap the Australian investor base. The bank became the third from the region – and the second this year – to tap the Kangaroo market when it priced its inaugural issue on March 25.
The Australian Office of Financial Management (AOFM) says healthy demand for its latest syndicated deal – predominantly from domestic accounts – drove record volume. The AOFM priced a new A$7 billion (US$6.3 billion) 12-year syndicated issue on March 12 in a transaction which surpassed the Australian market's record deal volume – a 20-year A$5.9 billion deal also placed by the AOFM, in November last year.
The Reserve Bank of New Zealand (RBNZ) raised the official cash rate (OCR) by 25 basis points to 2.75 per cent on March 13, in line with analyst and market expectations. The bank is the first developed-world central bank to raise rates in this cycle. Strategists and economists interpret the firm language in the accompanying monetary policy statement (MPS) as demonstrative of a "need for follow-up OCR increases".
Healthy investor demand for securitisation issuance saw two new deals, from AMP Bank (AMP) and Heritage Bank, price in the first week of March. Borrowers and joint lead managers agree the pipeline for further issuance is strong, supported by ongoing demand for lower-rated notes and bank balance sheet participation.
Westpac Banking Corporation (Westpac) says its first Basel III compliant tier-two transaction issued without retail documentation further developed the institutional participation seen in Australia's first wholesale of new-style tier-two bank debt earlier this year. But while institutional investors are broadly becoming more comfortable with new-style tier two – in particular how to value non-viability – some say they still find better value elsewhere.
New Zealand's bond market started the year on the front foot and its participants are bullish on the prospects for future supply. The most eye-catching deal to date has come from Fonterra Co-operative Group (Fonterra) which, despite the likely limited opportunities for other issuers to replicate the trans-Tasman transaction, is hailed by bankers for its innovative approach to maximising competitive tension in the New Zealand domestic market.
After the AB tranches in Bendigo and Adelaide Bank (BEN)'s recent Torrens Series 2014-1 Trust (Torrens 2014-1) were the most hotly-bid of the tranches offered, the Australian Office of Financial Management (AOFM) announced on February 28 that it has sold the bulk of its holdings of class AB notes of residential mortgage-backed securities (RMBS) tranches.
Improving demand for New Zealand dollar paper from offshore investors saw the World Bank price its largest – and the market's second largest ever – deal on February 18. The borrower and joint lead managers on the transaction point to significant offshore participation with a strong bid out of Asia as a main driver for the deals success.