News

Following the federal government's mid-year economic and fiscal outlook update (MYEFO), the Australian Office of Financial Management (AOFM) has increased its borrowing programme for 2013/14. Analysts are more concerned about the government's budget update given a stark revision in what has been a relatively stable global period, and expect rating agencies to hint at a desire to see a medium-term plan to protect Australia's triple-A rating.

The New Zealand Debt Management Office (NZDMO)'s funding programme for 2013/14 has been reduced – by NZ$2 billion (US$1.7 billion), to NZ$8 billion – following New Zealand's half-year economic and fiscal update (HYEFU). The funding update, which was published on December 17, reaffirms the NZDMO's commitment to issuing up to NZ$5 billion of its current-year requirement in the form of inflation-indexed bonds (IIBs).

Asset allocation within Australia's managed funds industry continued to see withdrawals from domestic fixed income in the third quarter, according to data published by Morningstar on December 10. In fact, withdrawals increased relative to the preceding quarter, despite Q2's activity being sparked by US tapering speculation which appeared to have passed by the time of the most recent data set.

The "still uncomfortably high" level of the Australian dollar remains the key fixation of the Reserve Bank of Australia (RBA) in the eyes of analysts, with the reserve bank not changing its language on the exchange rate despite a drop to US$0.91 from US$0.95 in the month since its last cash rate decision. On December 3 the RBA left the Australian cash rate on hold, at 2.5 per cent, to the surprise of very few observers.

Speaking at an investor and dealer lunch in Sydney, the state treasurer of Western Australia (WA), Troy Buswell, emphasised the importance the state government places on its rating. Buswell admitted that ratings preservation may not have been a sufficiently high priority in the past, but insisted that WA's September downgrade by Standard & Poor's Ratings Services (S&P) has focused the attention of government – even if there is a political cost.

Participants at the Finance and Treasury Association (FTA)'s annual congress, which took place in Brisbane on November 19-21, have been impressed by the new depth and reliability of the AUD bond market. The main funding-related concern of treasurers appears to be the potential impact of regulation on the cost of capital, with derivatives reporting in particular coming under fire.

The probability of strong post-pricing performance drove strong domestic investor interest in Anglo American's debut Kangaroo deal – enabling the deal to be doubled in size. In fact it could easily have been bigger still if it were not for the intraday execution strategy – but even so market participants agree the deal is positive for the continued development of the Australian market.

The Australian Office of Financial Management (AOFM) priced a new A$5.9 billion (US$5.53 billion) 2033 syndicated issue on November 19 in what was the largest ever Australian dollar bond deal to date – the AOFM and Queensland Treasury Corporation both previously issued the largest volume at A$4 billion in May 2013 and February 2011 respectively.

Australia's superannuation industry expects to be a central subject of the forthcoming national financial system enquiry. The apparent disconnect between superannuation capital and key Australian assets, including infrastructure and corporate debt, is also expected to be a focus, though superannuation market participants say they will resist anything which resembles a forced mandate.

Following the Australian Prudential Regulation Authority (APRA)'s confirmation that Australia will soon get its own master trust securitisation regime, market participants say Australia's first master-trust deals will likely not take long to come to fruition. However, the detail of APRA's revised APS 120 will be key – and implementation may not occur until 2015.

The regulatory future of securitisation in Australia looks positive following constructive comments on the nature and purpose of the asset class made on November 11 by Charles Littrell, executive general manager at the Australian Prudential Regulation Authority (APRA). Included in his remarks was the confirmation that, subject to certain provisos, Australia will likely get its own master trust regime.

Telstra Corporation (Telstra) says its latest domestic benchmark bond issue, which priced for A$500 million (US$473.4 million) on November 8, attracted strong support from domestic and international investors despite its five-year tenor. Australia's corporate bond market has tended to focus on seven-year deals in the second half of 2013 as investors seek higher yield.