News
There is no sign of the receptive primary market for financial institution issuers in Australian dollars losing momentum, according to issuer and intermediaries on the latest such deal. As has been the case in many recent transactions, a strong bid out of Asia was instrumental in driving early momentum in MUFG Bank Sydney Branch’s floating-rate-only deal.
A desire to expand its US dollar curve brought Westpac NZ back to the 144A market for a second transaction. On the way to landing what the issuer believes to be a record-breaking orderbook for a foreign currency deal from a New Zealand borrower, the deal echoed recent financial institution issuance in Australia by deriving early momentum from Asian demand.
Canada Pension Plan Investment Board returned to the Kangaroo market on 22 February with a 10-year print that smashed the record for deal size at this duration by any borrower outside the domestic government sector. The issuer says the scale of demand took it by surprise despite its commitment to introducing new bond lines via substantial benchmark transactions.
New Zealand Local Government Funding Agency is confident about its ongoing Australian dollar issuance prospects despite expressing disappointment at the Reserve Bank of Australia process that saw the issuer initially granted repo eligibility before having that status withdrawn. The issuer believes the outcome highlights anomalies in the expanded list of assets eligible for repo in Australia but will not take its claims further.
Australian dollar market capacity for financial institution issuance at the start of 2024 continues to surprise even seasoned market participants. Rabobank Australia became a beneficiary on 20 February, pricing A$2.15 billion – comfortably its largest print size of all time – with deal sources saying the buy side has not issued a murmur of indigestion so far.
Firstmac’s first residential mortgage-backed securities transaction of 2024 featured a substantially scaled lead manager bid and still matched the issuer’s record deal volume, as the securitisation market remains hot in early 2024. The deal upsized beyond the borrower’s expectations and final volume outcome was capped only by asset capacity.
An earlier than typical start to Australian securitisation deal flow in 2024 has allowed issuers to take advantage of largely supportive conditions on the buy side. In particular, pricing on mezzanine tranches continues to move tighter – as evidenced by the latest addition to Columbus Capital’s Triton programme.
A large and diverse orderbook combined with pricing flat to the local major-bank curve added up to the best of possible worlds for DBS Bank Australia Branch’s latest foray into the local market. The issuer says record book volume and the pricing outcome speak to a market that shows no sign of saturation.
On 14 February the International Capital Market Association released a paper titled Transition Finance in the Debt Capital Market. Two of the authors speak to KangaNews about the key callouts from this report, stressing that early voluntary moves will be the most effective way for fossil fuel companies and those in other hard-to-abate sectors to secure the scale of financing needed for their decarbonisation journeys.
The rationale for Japanese investor engagement with the Australian dollar market should remain in place even if – as many on the local buy side increasingly anticipate – Japan’s monetary policy takes further steps toward normalisation in 2024. Meanwhile, Australian dollar spreads in most asset classes continue to stack up on a relative basis.
The early weeks of 2024 welcomed record deal flow in the supranational, sovereign and agency Kangaroo market, but with the large majority of supply coming from the sector’s biggest and most frequent issuers. CAF – Development Bank of Latin America has demonstrated the market’s willingness to engage with a more diverse issuer by pricing its largest transaction in Australian dollars and its first of benchmark size since 2018.
Volkswagen Financial Services Australia opened the Australian dollar market for corporate issuers in 2024 with its largest deal by volume in more than four years. The deal was 1.4 times oversubscribed and achieved a good pricing outcome, the issuer says.