News

Kiwibank's issue of the first tier two instrument in the New Zealand market to contain explicit loss-absorbency language achieved strong investor support despite the securities' sub-investment grade rating, the issuer and its arranger say. The deal's structure made for an overwhelmingly retail buyer base, but in a market which continues to feature limited retail supply Kiwibank believes further subordinated bank issuance could find a welcoming home.

The suggestion by the International Monetary Fund (IMF) that the Australian dollar could in future be included in reporting of the currency composition of foreign exchange reserves (COFER) is more likely to be a sign of the currency's increased use in global reserves than a driver of future buying. In addition, market sources say reserve managers have been aware of the IMF's thinking for some months and any demand impact is mostly played out.

In a speech discussing implementation of the 18th National Congress of the Communist Party of China (CPC) – which will set the political agenda for China over the next five years – People's Bank of China (PBoC) governor, Zhou Xiaochuan, highlighted the country's bond market as a target for development. Zhou referred to both the mainland and Hong Kong markets and referred explicitly to the internationalisation of China's financial sector.

Edinburgh-based Sebastian MacKay, investment director at Standard Life Investments, who is part of a team managing US$2.5 billion of global bonds, talks to KangaNews about Australasian fixed income products and the global economy.

Swiss power and automation technology firm ABB (A/A2) priced its first Australian market bond deal on November 15, via fully-guaranteed local subsidiary ABB Finance Australia. The deal closed with final volume of A$400 million (US$414.4 million) – an upsize of A$100 million from launch – and attracted a book of over A$1 billion from more than a hundred accounts, according to its leads.

Non-financial corporate issuance in Australia is set for an all-time record volume month in November 2012 having surpassed the record for full-year issuance by early in the fourth quarter. More than A$10 billion (US$10.4 billion) of true corporate bonds had come to market in 2012 by mid-November, the first time the Australian market has ever reached this milestone without the contribution of credit-wrapped paper.

On November 8 Telstra Corporation (Telstra) (A/A2/A) returned to the domestic market with a new five-year, A$750 million (US$779.9 million) benchmark line. Lead managers say the deal – which was upsized from a launch volume of A$500 million – was supported by a strong international bid and numerous domestic accounts.

A capital transaction priced on November 5 by a group of Australian mutual authorised deposit-taking institutions could lead to future pooled funding deals, the group hopes – including in senior unsecured and covered bond format. The new deal, issued by the Australian Mutual Investment Trust (AMIT), will re-finance lower tier two debt issued by 17 mutuals in 2006.

A wave of significant changes to the global UBS Investment Bank (UBS) business that are the basis of an expected 10,000 reduction in headcount do not affect the Australian operation, the bank says. A spokesperson tells KangaNews the Australian business is already structured in line with global goals, so moves which already include the shuttering of UBS's supranational, sovereign and agency (SSA) business in London do not necessitate changes locally.

The Australian Office of Financial Management (AOFM) published its annual report for the 2011/12 financial year on October 30, which the agency used as an opportunity to highlight strong demand, tightening yields and extended tenor as key successes for the Commonwealth government securities (CGS) market over the period. The AOFM says 10-year Treasury bond yields declined by more than 200 basis points during 2011/12.

The New Zealand Debt Management Office (NZDMO) says it was pleasantly surprised by the demand its return to inflation-linked issuance received, which included substantial European participation. The transaction's lead managers reveal that the NZ$2.5 billion (US$2.1 billion), 2025 issue attracted a final order book of around NZ$4.3 billion.

The Australian Prudential Regulation Authority (APRA) has outlined the conceptual context of its forthcoming new permanent regime covering securitisation in Australia. The new regime – on which APRA expects to initiate consultation early in 2013 with implementation to follow the next year – will be based on the regulator's desire to simplify securitisation rules, to facilitate funding-only issuance, and to address lessons learned about the market.