News

Benchmark financial institution (FI) issuance returned to the Australian domestic market in July, with a total of A$3.9 billion (US$2.9 billion) printed across a trio of public three-year deals. With market volatility limiting FI issuance in preceding weeks, deal sources say a build up in investor cash as well as issuer willingness to execute at investors’ preferred tenor drove the transactions.

Ongoing demand for long-dated Australian dollar product, predominantly from specific cohort of investors in Asia, helped Zurich Finance Australia (Zurich) to execute a rare 20-year benchmark financial-institution (FI) senior deal in July. Demand is niche, but market sources insist the outcome is an important step in the continued evolution of the Australian market.

Debt-market-relevant institutions are increasingly integrating the UN sustainable development goals (SDGs) into their sustainability agendas, with potential consequences for green and social funding. The critical role of the SDGs is to provide a common language for capital-markets participants to assess impact.

A trio of subordinated corporate debt deals priced in New Zealand between late May and early July, in what intermediaries say is a sign that local retail investors are supportive of issuance despite challenges in other funding markets. Scarcity of debt securities with the attractive headline yield offered by sub debt drove demand, they add.

The big story in the Australian dollar high-grade market in 2018 has been 10-year US Treasuries (USTs) consistently yielding more than the equivalent Australian Commonwealth government bonds (ACGBs) – with little prospect of a reversion. KangaNews spoke to a range of dealers in June to get their read.

While markets have remained liquid and tradeable throughout 2018, there can be little doubt that the period of almost unprecedented beneficial funding conditions that pervaded up to the end of 2017 has passed. At their annual global-markets roundtable in London in June, ANZ and KangaNews heard the latest thinking from key issuer and investor players.

Pricing became challenging for Australian issuers in the Asian-targeted US dollar Reg S market later in the first half of 2018, after a flurry of corporate transactions over the preceding 12 months. But market participants in Asia insist the regional liquidity pool will increasingly challenge old favourites like US private placements (USPPs) and domestic issuance for Australian-origin flow.

The US private placement (USPP) market provided insulation from global volatility as well as the mix of tenors and volume Port of Melbourne desired for its capital markets debut, according to the issuer and its agents. With a large portion of its acquisition finance now termed out, the issuer says it has scope to consider public markets for future transactions.

South Australian Government Financing Authority (SAFA) executed the largest deal seen in the Australian market in nearly two months on 4 July, printing A$1 billion (US$737.8 million) of new 10-year notes. Andrew Kennedy, Adelaide-based director, treasury services at SAFA, discusses the effect of market conditions on the transaction.

Deal flow in the Australian market, particularly for domestic senior transactions, virtually ground to a halt in June. A confluence of factors contributed to the lack of supply, dealers say, including issuers having prefunded ahead of expected turbulence, relative value and geopolitical tension. But intermediaries insist the market remains open for business.

Auckland Council revealed its intention to be New Zealand’s first domestic green-bond issuer in March, with market development one of its key objectives. In the wake of the transaction’s pricing, on 21 June, deal sources say the issuer achieved this objective, uncovering significant demand and attracting new investors.

Late in the Sydney day on 19 June, following the release of the New South Wales (NSW) state budget, NSW Treasury Corporation (TCorp) revealed a A$6.6 billion (US$4.9 billion) term-funding requirement for the 2018/19 financial year. The borrowing programme is comprised of A$2.4 billion of new client loans and A$4.2 billion of projected maturities.