Capping a flurry of activity in the Australian corporate bond market, Volkswagen Financial Services Australia (VWFS) (A-/A3) priced a A$125 million (US$115.2 million) transaction on November 24 – the third corporate deal in two days. The three-year, fixed rate bond deal is Volkswagen's second of 2009 and priced at a margin of 200 basis points over swap.
Western Australia Treasury Corporation (WATC) (AAA/Aaa) achieved target issuance of A$1 billion (US$923.2 million) in its new July 2012 benchmark line on November 24 via a new money and consolidation tender on November 24. Although, WATC did not use syndication for the new deal it will still consider it for longer-dated or larger new line transactions in future.
A brace of corporate deals – from AMP Capital Wholesale Office Fund (AWOF) (A-, with an issue rating of A) and Caterpillar Financial Australia (Caterpillar) (A/A2/A) – priced on November 23, achieving upsized volume of A$250 million (US$229.7 million) apiece. Meanwhile a third deal, from Volkswagen Financial Services Australia (VWFS) (A-/A3) launched with an increase from a minimum size of A$100 million also expected.
While demand appears to be building, pricing on domestic bank deals continues to stagnate as indicated by Royal Bank of Scotland Australia Branch (RBS)'s (A+/Aa3/AA-) guaranteed A$2 billion (US$1.84 billion) fixed- and floating-rate February 2011 deal, which priced on November 20. The transaction came to market at 25 basis points over swap and bank bill swap rate (BBSW) – demonstrating little primary price action in over a month.
As deals continue to be brought to market the Australian asset-backed security (ABS) market is showing signs of renewed life and returning investor confidence. While participants say pricing is not yet tight enough for smaller mortgage providers to borrow at levels competitive with the unsecured funding of larger authorised deposit-taking institutions (ADI), there is shared optimism that something closer to parity can be attained and other names will enter the market in the coming months.
On November 17 ME Bank priced a A$780 million (US$728 million) residential mortgage-backed security (RMBS) deal – its third non-government backed transaction of 2009 and the third asset-backed security (ABS) to price in Australia in a week. SMHL Securitisation Fund 2009-3 was also upsized from indicative volume of A$500 million at launch.
Two deals – from Council of Europe Development Bank (CEB) (AAA/Aaa/AAA) and Inter-American Development Bank (IADB) (AAA/Aaa) – priced a total of A$700 million (US$654.08 million) in the Kangaroo market on November 17. At the same time a third supranational – African Development Bank (AfDB) (AAA/Aaa/AAA) – was on roadshow in Australia with the goal of becoming a more regular Kangaroo borrower.
The long-awaited reorganisation of National Australia Bank (NAB)'s debt business has brought the bank back into the frequent borrowers space where it has been under-represented for some time, with new roles for several individuals with track records in that market. Corporate and less frequent borrower activity has also been restructured in an attempt to offer synergies between bond, loan and securitisation markets.
On November 13 Nordic Investment Bank (NIB) (AAA/Aaa) increased its 6 per cent August 2014 Kangaroo bond by A$200 million (US$185.7 million), bringing the total in this line to A$500 million. The tap, led by ANZ Banking Group and Deutsche Bank, priced at 27 basis points over mid-swaps or 82.5 basis points over the 6.25 per cent June 2014 Australian commonwealth governnment bond. This compares with pricing of 36 basis points over swap when NIB inaugurated the line on August 12.
German agency KfW Bankengruppe (KfW) (AAA/Aaa/AAA) has increased its March 2017 line, pricing a A$350 million (US$327 million) tap via lead manager TD Securities. The tap brings the entire line to A$850 million. The new tranche priced at 104.75 basis points over the February 2017 Australian government bond, which, according to KangaNews calculations, equates to high 30s to 40 over swap.
Westpac Banking Corporation (Westpac) (AA/Aa1) returned to its domestic market on November 11 with the pricing of A$2.5 billion (US$2.32 billion) of five- and seven-year paper. According to KangaNews data, the 2016 tranche – which is unguaranteed – is the longest-dated senior unsecured, domestic transaction from an Australian big four bank since the same issuer priced A$140 million of 10-year notes in August 2001.
Following the November 6 pricing of its second Kauri transaction of 2009 – a NZ$100 million (US$74.04 million) increase to the issuer's 2015 line – Nordic Investment Bank (NIB) (AAA/Aaa/AAA) has become the largest Kauri issuer by outstanding volume. Its total of NZ$950 million in two New Zealand market lines pushes European Investment Bank (EIB)'s (AAA/Aaa/AAA) NZ$900 million into second place.