News
The Reserve Bank of New Zealand (RBNZ) has published a summary of the 161 submissions it received on its proposals to increase the capital requirements of locally incorporated banks. Bank and financial-market responses to the consultation mirror market commentary on the topic but martial the industry response to proposals most in the sector see as onerous.
On 18 June, the EU technical expert group (TEG) subgroup on taxonomy published the Taxonomy Technical Report. The taxonomy is expected to become the world’s foremost roadmap for sustainable investment, with a key definitional role in the green-bond market.
Bank balance sheets doubled their participation in New South Wales Treasury Corporation (TCorp)’s latest syndication. Market participants say this is no surprise given a recent tweak to Australia's liquid-assets regime for major banks – adding that the changes should drive further incremental bank demand to local high-grade issuers.
Standard Chartered priced its debut Kangaroo transaction on 25 June, with a A$1 billion (US$700.1 million) deal eligible for minimum requirement for own funds and eligible liabilities (MREL). Deal sources say the Kangaroo format is becoming a reliable means for global financial institutions (FIs) to gain domestic investor penetration with total loss-absorbing capacity (TLAC)-eligible deals.
S&P Global Ratings (S&P) published a report on 26 June, positing that the Reserve Bank of New Zealand (RBNZ)’s proposed increase to bank-capital requirements will have minimal effect on the availability of credit in New Zealand, based on capital requirements stipulated by Australian Prudential Regulation Authority (APRA).
Balance-sheet asset growth is driving an increased funding need for Industrial and Commercial Bank of China New Zealand Branch (ICBC NZ), the issuer says. This translated into a NZ$200 million (US$132.6 million) print on 21 June which, according to KangaNews data, is the bank’s largest-ever New Zealand dollar deal.
Barclays received a blowout book in its recent Kangaroo deal, leading it to upsize to its maximum volume. The spread pick-up over domestic and global peers, lack of credit diversity and increasing acceptance of holding company (holdco) financial institution (FI) debt all gave domestic investors reasons to participate.
Coupons in New Zealand’s retail corporate bond market continue to reach new lows, with Mercury’s deal priced on 19 June a record low for a subordinated-capital deal. The issuer and arranger say that retail investors will take time to adjust to lower coupons, but with redemptions in New Zealand currently outpacing supply, demand has been forthcoming.
Westpac New Zealand (Westpac NZ) became the first New Zealand-based financial institution to issue a green bond on 18 June, with a €500 million (US$563.3 million) deal. The issuer says it wants to be a leader in the space and demonstrate the viability of the funding source to the local market.
Vicinity Centres (Vicinity) defied recent headlines around forecasts for the retail sector in its recent transaction, attracting significant demand from investors in Australia and Asia. Lead managers suggest that the issuer’s proactive engagement with investors and flexibility in meeting investor demand was key to the deal’s success.
On 19 June, following the release of the South Australia state budget on the previous day, South Australian Government Financing Authority (SAFA) revealed a term-funding requirement for the 2019/20 financial year of A$3.2 billion (US$2.2 billion). The issuer’s requirement is expected to decrease in the 2021 and 2022 financial years before increasing at the end of the out years.
On 18 June, following the release of the New South Wales (NSW) state budget on the same day, New South Wales Treasury Corporation (TCorp) revealed a borrowing requirement for the 2019/20 financial year of A$13.3 billion (US$9.1 billion). The requirement represents a A$1.4 billion increase from the estimate at the 2018/19 budget.