On July 17 Bank of Scotland Australia Branch (BoS Australia) (A+/Aa3/AA-) priced its three-year domestic transaction supported by the UK government guarantee, selling a total of A$1.75 billion (US$1.41 billion) of fixed and floating paper at 70 basis points over swap and bank bill swap rate (BBSW) in a deal the issuer says was oversubscribed.
With the end in sight for investment into residential mortgage-backed securities (RMBS) from the Australian Office of Financial Management (AOFM), especially for authorised deposit-taking institution (ADI) issuers, some mortgage originators are increasingly open to sourcing funds in the vanilla bond market while moving away from a traditional reliance on securitised issuance.
The second and last transaction from the second round of Australian Office of Financial Management (AOFM)-supported residential mortgage-backed security (RMBS) activity priced on July 14, with Australian Central Credit Union (ACCU) bringing a total of A$263.2 million (US$206.09 million) to market – A$190 million of it purchased by the AOFM.
The first deal in the penultimate round of residential mortgage-backed securities (RMBS) investment by the Australian Office of Financial Management (AOFM) began on July 10, with Wide Bay Australia achieving an upsize of A$33.5 million (US$26.15 million) in its A$433.5 million transaction.
The Kauri deal launched by World Bank (AAA/Aaa) on July 9 achieved volume of NZ$300 million (US$189 million) in the anticipated new five-year line a day later, with pricing on the transaction of 37 basis points over the benchmark 2015 New Zealand government bond – understood to equate to mid-20s basis points over five-year swap.
Heritage Building Society (HBS) (BBB/Baa3) issued a total of A$400 million (US$312.72 million) of government guaranteed three- and five-year bonds on July 9 with the issuer saying it expects to return to the vanilla market more frequently in future as it switches its wholesale funding out of the challenged asset-backed security (ABS) market.
The most active Australian borrower in the unguaranteed arena, Commonwealth Bank of Australia (CommBank) (AA/Aa2/AA), priced the first five-year maturity unguaranteed transaction from a domestic Australian bank for almost a year on July 7, with the issuer saying real money demand drove an upsize from A$500 million (US$397 million) at launch to A$2 billion.
Four antipodean government-related entities (GREs), two of which have recently issued AUD bonds, could be affected by Standard & Poor’s (S&P)’s new methodology for assessing the credit quality of the sector. Airservices Australia (AsA) (AAA) seems likely to retain its top rating, while Australia Post (AAA) has been placed on negative credit watch and says it plans dialogue with S&P with a view to securing its own triple-A.
Western Australia (WA) has joined Victoria in saying it will not initially take up the government guarantee on the existing state debt issued by the Western Australia Treasury Corporation (WATC) (AAA/Aaa), although it has left open the possibility of opting into the guarantee at some point in future if necessary.
Bank of New Zealand (BNZ) (AA/Aa2) more than doubled the size of the only outstanding bond to be covered by the New Zealand government's wholesale guarantee on July 3, adding NZ$415 million (US$261.41 million) to the outstanding NZ$285 million in its February 2014 line.
On July 2, Rentenbank (AAA/Aaa/AAA) became the eighth supranational, sovereign and agency (SSA) issuer to return to the Kangaroo market in 2009 with the pricing of its A$450 million (US$361.49 million) new 2014 line. The deal came to market at a margin of 108.5 basis points over the benchmark 6.5 per cent June 2014 Australian government bond.
Issuers outside the local big four banks continue to take advantage of the Australian government guarantee, with ABN AMRO Australian Branch (ABN) (A+/Aa2/AA-) and Bank of Queensland (BOQ) (BBB+/A2/BBB) bringing deals on July 1 and ING Bank Australia (ING) (AA-) following hot on their heels with another transaction a day later.