News

KangaNews is pleased to announce the best performers in its second annual Fixed Income Research Survey, in which Australian investors were asked to recognise the performance of fixed income research across nine categories. Around 50 investment firms participated in the survey, representing the bulk of major institutional investment funds in the Australian market across the fund management, insurance and balance sheet sectors.

The projected funding requirement faced by New South Wales Treasury Corporation (TCorp) for the 2012/13 financial year is, at A$10.7 billion (US$10.6 billion), identical to the target for the current year that was set in June 2011. TCorp figures say an increase in new client funding for 2012/13 – to A$7.6 billion from A$4.5 billion – and a reduced level of pre-funding will offset a significantly reduced refinancing requirement.

Issuers and intermediaries believe the introduction of legislation to support New Zealand's covered bond regime will help the country's banks develop their offshore investor base – both for foreign currency securities and, potentially, for NZD-denominated paper. While emphasising that New Zealand banks have not struggled to issue covered bonds under the existing, regulated system, market participants say a legal setup could add price tension.

Australian and New Zealand markets lay low for the week ending 8 June: activity included two new launches with a subordinated and an asset-backed security expected in the coming weeks although no transactions priced. The New Zealand and Kangaroo markets remained void of public primary market activity.

Provisional ratings have been assigned to Macquarie Leasing (Macquarie)'s second predominantly-US dollar asset-backed securities (ABS) issue of 2012. Smart Series 2012-2 US Trust – a securitisation of auto loans – has provisional volume of US$400 million across its four senior tranches with the lower-rated notes denominated in Australian dollars for a combined volume of A$62.4 million (US$60.9 million).

A substantial benchmark bond maturity accounts for the bulk of the South Australian Government Financing Authority (SAFA)'s increased expected funding task of A$6.4 billion (US$6.2 billion) for the 2012/13 financial year. The total figure is A$2.7 billion higher than the equivalent for 2011/12, but the coming year includes a A$2.1 billion maturity in May 2013 while the current period contained no benchmark expiries.

The ninth Australian Securities Exchange-listed debt transaction of 2012 launched on June 4, with Seek announcing plans to issue A$125 million (US$120.7 million) of subordinated notes with a five-year call date. The expected margin on the notes – 500-550 basis points over bank bill swap rate, with a further 200 basis point step-up if not called – is the highest of all the year's retail fixed income listings.

After a month of state budgets and an uptick in asset-backed securities issuance, the last week of May brought one more residential mortgage-backed security to the market. The week ending June 1 also included the first Australian covered bond from a local issuer outside the big four banks.

Forecast persistent state budget deficits caused by revenue pressures caused Standard & Poor's (S&P) to downgrade the state of South Australia and its funding entity, the South Australian Government Financing Authority, to AA+ on May 31. The state was already on negative outlook from S&P, and that outlook has been maintained even following the one-notch downgrade.

Following the confirmation of its position as Australia's third-largest state term funder Western Australian Treasury Corporation (WATC) says its issuance strategy will remain broadly consistent with its approach in previous years. Having recently become the last of Australia's sovereign and semi-government borrowers to issue bonds via syndication, WATC has also left open the possibility of further bookbuilt deal flow in future.

Strong demand for Suncorp Metway (Suncorp)'s debut covered bond transaction on May 30 – also the first domestic Australian covered bond issue from a borrower outside the big four banks – enabled the issuer to increase the size of its fixed-rate offering and add a floating-rate note (FRN) component. Suncorp says it hopes to use the domestic debut as the springboard for future Swiss franc and euro covered bond issuance.

Tatts Group (Tatts) closed its senior retail bond transaction on June 29, with final volume, at A$194.7 million (US$199.8 million) marginally below the A$200 million initial target. The company announced on June 6 that it has set the deal's margin at 310 basis points over bank bill swap rate – the wider end of its 20 basis point marketing range.