One year after Commonwealth Bank of Australia (CommBank) (AA/Aa1/AA) launched the first Australian government guaranteed bank transaction, the sector has issued a total of around A$130 billion (US$119 billion) in nearly 400 transactions across currencies. And while the use of the guarantee has gradually declined, issuance has surpassed the equivalent of US$10 billion in every three month period.
A day after announcing details of its next round of financial support for the residential mortgage-backed securities (RMBS) market, the Australian Office of Financial Management (AOFM) has released more information on the "pipeline funding" strategy it expects to use to aid RMBS-dependent institutions. Under this part of the scheme, issuers and arrangers are invited to apply for a series of AOFM investments in successive RMBS deals.
Instead of the previous request for proposal (RFP) process, issuers will be invited to bring reverse inquiries to the Australian Office of Financial Management (AOFM) to secure part of the second injection of government money into the local residential mortgage-backed security (RMBS) market. In a December 7 notice, the AOFM also says it hopes to buy smaller proportions of selected RMBS than was the case with its first support package.
Bank Nederlandse Gemeenten (BNG) (AAA/Aaa/AAA) priced A$300 million (US$278.16 million) in a new three-year Kangaroo deal on December 3 – the issuer's first public transaction in the market for over three years. The agency recently priced its first Kangaroo transaction since November 2006 when it sold A$230 million of 2013 bonds in a private placement.
In the first Kauri transaction to price since November 6, the World Bank (AAA/Aaa) increased its December 2014 bond by NZ$175 million (US$126.93 million) to bring the total outstanding in the line to NZ$475 million. The December 3 transaction was anchored by domestic demand according to TD Securities (TD), which lead-managed along with ANZ.
With the A$500 million (US$462.4 million) increase to its 2014 line on December 2, European Investment Bank (EIB)'s (AAA/Aaa/AAA) issuance total in the Kangaroo market in 2009 reached A$6.05 billion – easily a record for a single borrower year. The latest deal brings the volume of EIB's 2014 line to A$2.4 billion, making it the second largest outstanding Kangaroo and just A$100 million smaller that the same issuer's 2013.
Bendigo and Adelaide Bank (BEN) (BBB+/A2/BBB+) priced its first non-government backed residential mortgage-backed securities (RMBS) transaction of 2009 on December 2, doubling its indicative size from launch on November 27 to A$1 billion (US$928.2 million). It also achieved a tighter margin on the largest tranche than those of other recent RMBS deals.
Bank of Queensland (BOQ) (BBB+/A2/BBB+) returned to the domestic market on December 2, pricing a A$1.1 billion (US$1.02 billion), floating rate 2013 line under the Australian government guarantee. It also tapped the line a day later, adding a further A$150 million "following further investor interest", according to lead managers RBS Group Australia and UBS.
Investec Bank Australia (Investec) (Baa2/BBB) increased the size of the Australian government-guaranteed five-year transaction it priced on November 27, eventually selling A$450 million (US$407.66 million) of fixed rate notes rather than the A$250 million indicative size at launch the day before. Investec has now issued A$1.05 billion in the Australian market in 2009, all under guarantee.
Despite a five-year basis swap in historically wide territory issuance in the Kangaroo market has slowed to a near standstill, with the 2019 maturity issued by KfW Bankengruppe (KFW) (AAA/Aaa/AAA) on November 26 being the first primary activity in the Kangaroo space since November 17. And while the current basis is favourable for offshore issuers, intermediaries say there are several factors – including continued volatility in the basis itself – constraining further activity.
Following a busy start to November, the new 2019 maturity bond priced on November 26 by KfW Bankengruppe (KfW) (AAA/Aaa/AAA) was the first Kangaroo transaction for over a week. And while October and November are now the busiest Kangaroo issuance months since early 2007 market sources say the window for potential issuance is narrowing – despite a favourable basis swap for offshore issuers.
A comparison of 45 major global banks under Standard & Poor's (S&P)'s new risk-adjusted capital framework (RACF), published on November 23, ascribes to most – including the three Australian firms analysed – RAC numbers significantly lower than their published tier one ratios. S&P says the new assessment "illustrates our existing opinion that capital remains a neutral to negative rating factor for the majority of banks in our sample".