News
There was only a sprinkling of deal activity in the Australia and New Zealand domestic markets in the first full week of May. Of greater focus was the release of half-year results for National Australia Bank and Westpac Banking Corporation (Westpac), after ANZ Banking Group's were published on May 1. Westpac also launched a new tier-one hybrid issue during the week under review.
The state of Victoria's plans to lease out the Port of Melbourne – with proceeds expected to hit state coffers in the 2015/16 financial year – have reshaped the borrowing plans of Treasury Corporation of Victoria (TCV). With the port lease proceeds slated for use to pay down state debt, TCV expects to conduct a greater-than-usual proportion of its 2014/15 funding task in short-term markets.
On May 8, KfW Bankengruppe (KfW) (AAA/Aaa/AAA) priced a fifth increase to its existing A$1.05 billion (US$982 million) March 2024 Kangaroo issue. According to KangaNews data, the line was introduced in September 2013 at a volume of A$300 million and pricing of 93.5 basis points over Australian government bond (ACGB).
National Australia Bank (NAB) reiterated that its capital position is comfortable at its May 8 half-year results announcement, despite a clutch of recent regulatory moves which add to the capital burden of the bank and its peers. NAB also updated its internal common equity tier-one (CET1) target, setting its goal at 0.75-1.25 per cent above the new regulatory minimum for domestic systemically important (D-SIB) banks.
On May 7, RedZed Lending Solutions (RedZed) priced its first residential mortgage-backed securities (RMBS) deal since 2011. Preliminary ratings were assigned on to the new securitisation of subprime mortgages by Standard & Poor's Ratings Services (S&P) on May 6.
Bendigo and Adelaide Bank (BEN) priced a new floating-rate note (FRN) issue in the Australian dollar market on May 7, BEN's first senior-unsecured issuance of 2014.
The Reserve Bank of Australia (RBA) kept the official cash rate (OCR) on hold – at 2.5 per cent – at its monetary policy committee (MPC) meeting on May 6, to the unanimous expectation of analysts and markets alike. Some analysts say that, as the final rate decision ahead of the 2014-15 federal budget on May 13, the May RBA statement – and decision – implies a central bank that is as satisfied as it can be with the level of policy.
Westpac Banking Corporation (Westpac) reported an increase in term funding in its results for the six months to the end of March this year on May 5. The bank notes improved sentiment in both the household and business sectors, leading to a slight increase in the pace of lending growth – which it was able to satisfy in part because of ongoing conducive conditions in wholesale funding markets.
Kiwibank confirmed on May 5 that it will proceed with the issue of a new tier-two security via a special-purpose vehicle (SPV), Kiwi Capital Funding. The transaction is for a volume of up to NZ$100 million (US$86.7 million) and will be Kiwibank's second issue of Basel III-compliant tier-two notes and the first with conversion to equity, rather than write-off, as its loss-absorbency mechanism.
Another slow week for deal flow saw only a handful of transactions price across both the Australian and New Zealand markets, with the largest transaction of the week being a replacement offer by the Australian Office of Financial Management (AOFM). New borrower Emirates NBD priced its first Kangaroo deal since a merger between Emirates Bank and National Bank of Dubai in 2007.
Among the 86 key recommendations in the final report of the National Commission of Audit (NCA) on Australia's fiscal position, released on May 1, are five addressing the fiscal imbalances that exist in the current Commonwealth-state relationship. Some analysts believe these recommendations, if adopted, have the potential to radically change the financial relationship between Australia's central and regional government – and thus related capital markets.