ING Bank Australia (ING) launched its debut transaction in the Australian residential mortgage-backed securities (RMBS) market on October 7 as a A$500 million (US$487.5 million) transaction. The deal, IDOL Trust Series 2010-1, is based on a pool comprising only full-doc, fully mortgage insured loans and is expected to price on or before October 14.
Crédit Agricole (AA-/Aa1/AA-) priced its inaugural Kangaroo issue on October 8, selling a total of A$900 million (US$884.4 million) in the three-year deal. The transaction takes aggregate Kangaroo volume for 2010 to date to A$33.4 billion, surpassing the previous annual record of A$32.47 billion placed in full year 2006.
FleetPartners, which recently debuted as a securitiser with an auto loan-backed deal, issued the first auto operating lease transaction in Australia on October 5. The A$685.4 million (US$666.1 million) FP Turbo Trust 2007-1 (Australia) transaction hinged on the participation of a single third-party investor – Industry Funds Management (IFM) – in its lower-rated tranches, but the issuer is optimistic about the prospects of future such deals in the public arena.
By the end of the third quarter, combined Kangaroo and domestic credit bond issuance – excluding government-guaranteed securities – had already made 2010 a record-breaking year for the Australian bond market. At the end of September, a total of A$64.4 billion (US$ 62.2 billion) of primary market credit transactions had closed, surpassing the A$63.1 billion brought to market in full year 2006.
Canadian Imperial Bank of Commerce (CIBC) (A+/Aa2) priced A$750 million (US$737.8 million) in its debut, three-year transaction in the Kangaroo covered bond market on October 7. The deal was placed at a margin of 48 basis points over semi-quarterly swap – slightly tighter than the region of 50 basis points over swap expected at launch a day earlier.
Following a quiet week for deal activity across asset classes, market participants remain optimistic of forthcoming flow. In the asset-backed securities (ABS) market momentum appears to be continuing off the back of a brace of recent securitisations, with two issuers believed to be coming to market in the coming days and an expectation of deal flow in double figures for the rest of the year.
The New Zealand Debt Management Office (NZDMO) (AAA/Aaa/AAA) introduced a new 2019 nominal line on September 30, placing NZ$200 million (US$147.3 million) at a weighted average yield of 4.91 per cent having achieved a cover ratio of nearly five in the tender. Yield on the new line came in line with pre-tender predictions although the NZDMO appears to have paid only a tiny new issue premium.
Another issuer returned to the Australian market for the first time since the crisis with GE Capital Australia (AA+/Aa2) pricing a new A$750 million (US$727.2 million) five-year transaction on October 1. The fixed rate line has a coupon of 7 per cent, and priced at a margin of 223.75 basis points over the April 2015 ACGB.
Council of Europe Development Bank (CEB) (AAA/Aaa/AAA) priced its fourth Kangaroo deal of the year on September 29 - a new A$300 million (US$290.4 million) 10-year line. The deal substantially extends CEB's Kangaroo curve from its previous end point of December 2015.
Issuers on- and offshore believe the Australian dollar market continues to develop as a consistent source of funds as issuance in both the Kangaroo and domestic arenas shows signs of added diversity. Recent weeks have seen new issuer sectors returning to the Kangaroo market – with covered bond borrowers also hovering – while the corporate pipeline in the domestic market is also starting to translate into deal flow.
The new April 2014 benchmark bond listed via tender by Western Australian Treasury Corporation (WATC) (AAA/Aaa) on September 23 came to market with a margin slightly tighter than that predicted by analysts. The agency placed a face value of A$500 million (US$478.4 million) of the 5.5 per cent coupon bond with by tender, attracting a cover ratio of 2.42, and a further A$616 million in a subsequent consolidation offer.
Speculation is mounting that the Kangaroo covered bond market could re-open as early as next week following a brace of roadshows from Canadian banks. However, at least one roadshow-arranging intermediary is playing down reports that a deal will inevitably take place, saying only that investor feedback is currently being assessed and a transaction will emerge if conditions are favourable.