News
The successful inclusion of structural nuances in Australia's first residential mortgage-backed securities (RMBS) transaction of 2014 suggests that long-awaited regulatory changes in the Australian securitisation market are starting to filter down to deal level. The transaction garnered 50 per cent offshore interest, leading to intermediary confidence about the extent to which new technologies and structures could help to grow Australia's securitisation universe.
Macquarie Bank priced first Australian dollar residential mortgage-backed securities (RMBS) issue of 2014 on February 6. Macquarie Bank has issued multiple mortgage asset-backed securities – most recently it completed a new A$1.25 billion (US$1.09 billion) – upsized from A$500 million at launch – RMBS in September 2013.
Kommunalbanken Norway (KBN) (AAA/Aaa) priced an increase of its July 2024 Kangaroo line on February 5 in what is the borrower's fifth visit to the market in 2014. According to KangaNews data, the tap is the second increase of the line which was introduced on January 7 this year with a volume of A$150 million (US$133.7 million) and pricing of 100 basis points over Australian government bond (ACGB). The line was later increased by A$200 million on January 21 with pricing of 98.75 basis points over ACGB.
As was unanimously expected by analysts, the Reserve Bank of Australia (RBA) left the cash rate on hold at 2.5 per cent at its first board meeting of 2014, on February 4. Analyst views coalesce around the RBA's policy bias to reflect a neutral stance – from its previous mild easing bias – and the removal of comments around the AUD remaining 'uncomfortably high'.
Momentum in Australia's domestic corporate bond market could be stalled in early 2014 by highly appealing conditions internationally. Intermediaries say improving basis-swap dynamics, spread compression and the ongoing desire on the part of global investors to seek yield could draw more corporate borrowers towards, in particular, European issuance in 2014.
The last week of January saw Australian deal flow continue at a steady but unspectacular pace. Kangaroo issuance remains solid with debut borrower ABN AMRO Bank pricing a new dual-tranche deal, citing favorable AUD market conditions. Meanwhile the local regulator released more detail on liquidity holdings expected of Australian banks.
European Investment Bank (EIB) (AAA/Aaa/AAA) priced a new long 10.5-year AUD Kangaroo issue on January 30. According to KangaNews data, the issuer last priced a deal in the Australian market in November last year. That deal had a volume of A$250 million (US$218.5 million) with pricing of 73 basis points over Australian government bond.
The Australian Prudential Regulation Authority (APRA) has provided local banks with more detail around how the Australian liquidity coverage ratio (LCR) regime will work from implementation at the start of 2015. Significantly, in a January 30 letter to banks APRA reveals that the Reserve Bank of Australia (RBA) has determined that local banks can reasonably be expected to hold, in aggregate, 30 per cent of the total supply of Commonwealth and semi-government securities.
Strong demand, favourable market conditions and a desire to diversify funding drew ABN AMRO Bank (ABN AMRO) to issue its debut Kangaroo deal on January 29. Joint lead managers say similar true Kangaroo borrowers from the financial institution (FI) sector are expected to come to the market in the next couple of months off the bank of ABN AMRO's success.
International Finance Corporation (IFC) (AAA/Aaa) priced an increase to its June 2018 Kangaroo line on January 29. The deal is the second increase of the fixed-rate line which was introduced in May 2013 and later increased in November 2013.