News
On August 5, the Australian Office of Financial Management (AOFM) announced a further increase of expected net issuance, to approximately A$60 billion (US$53.3 billion) for 2013/14. The announcement follows a release of updated economic and budget figures by the Australian federal government, which disclosed further deterioration to the country's expected budget position.
Improved investor confidence and lower market volatility saw two new deals from financial institution (FI) Kangaroo borrowers – Royal Bank of Canada (RBC) and Goldman Sachs – come to the market on July 30. But, leads say, the reopening of the market is not likely to be followed by an immediate flurry of issuance.
The non-resources sectors of the Australian economy will not compensate for the substantial negative impact on corporate capital expenditure of the end of the mining investment boom, a report from Standard & Poor's (S&P) suggests. However, economists believe rate cuts by the Reserve Bank of Australia (RBA) have begun to produce shoots of improvement in non-mining sectors.
Westpac New Zealand (Westpac) (AA-/Aa3/AA-) reopened the New Zealand domestic market on July 9, ending a month-long hiatus in new public issuance. With final interest topping NZ$500 million, Westpac was able to upsize the three-year floating rate note (FRN) to a final NZ$385 million (US$300.4 million) from an initial NZ$200 million minimum size.
Westpac Institutional Bank (Westpac) closed the first half of 2013 at the top of KangaNews's intermediary league tables for all Australian dollar vanilla bond issuance, which include credit, all Kangaroo, and syndicated sovereign and semi-government issuance. The bank's performance is not reliant on self-led volume: Westpac remains top of the table even when self-led deals are excluded.
KangaNews is proud to reveal the results of its 2013 Fixed Income Research Poll, in which Australian institutional investors were asked to vote for the best research providers across a range of sectors relevant to their market. This year's top performers have almost all turned in consistently strong results since the poll was introduced in 2011, but there is also a notable success for a resurgent investment bank.
The first half of calendar 2013 produced largely unspectacular issuance volumes across Australasian credit markets, as the virtual halt to primary activity in June compounded what had already been a moderate year in many sectors. According to KangaNews data, only the Australian corporate and asset-backed markets and New Zealand's Kauri product showed sufficiently robust issuance to register strong volumes across the half year.
Tabcorp Holdings (Tabcorp) had its credit rating downgraded by Standard & Poor's on June 25, with the rating agency's April change to its criteria for assigning equity credit to hybrid instruments a key cause of the move. Tabcorp, which had the equity credit on its A$250 million (US$231.2 million) hybrid lowered to intermediate from high, has had its issuer rating reduced by one notch to BBB- with a stable outlook.
New South Wales Treasury Corporation (TCorp) disclosed a significantly reduced expected funding requirement for its 2013/14 financial year on June 19, a day after a New South Wales (NSW) state budget which continued a theme of state balance sheet consolidation in the face of declining revenues. While some analysts saw little change to the state's outlook following the budget, others suggest asset sales have brought NSW closer to regaining stable status on its triple-A rating.
In an exclusive interview with KangaNews following the release of the Queensland budget on June 4, Tim Nicholls, treasurer of Queensland, says tackling revenue undershoots has been a key part of the government's budgetary process. He emphasises the state's commitment to controlling expenses and acknowledges that further debt reduction is needed in order to regain a triple-A rating.
The International Monetary Fund (IMF) recently published the results of a survey of the currency allocation plans of a swathe of global reserve managers. The results make happy reading for Australian dollar borrowers, indicating that the currency remains close to the top of the list of reallocation targets as reserve managers continue to seek additional diversification.
Kangaroo market participants ascribe the recent flurry of supranational, sovereign and agency (SSA) Kangaroo issuance to a global tightening of spreads and rolling interest in maturities. While a tapering off of issuance during the European summer is expected, most market participants believe fundamentals remain sound – despite the recent precipitous decline in the value of the Australian dollar.