News
Korea Finance Corporation (KoFC) commenced a series of Australian investor updates on May 6 as the agency attempts to make good on its intention to become a regular Kangaroo issuer. KoFC debuted in the domestic Australian dollar market in February last year, issuing a A$250 million four year in the second of 2012's flurry of Korean-origin Kangaroos.
On May 9, the Inter-American Development Bank (IADB) (AAA/Aaa/AAA) priced a new 10-year Kangaroo issue. IADB priced its previous issue on February 2013, a tap to its 2017 line, which had a volume of A$150 million (US$152.9 million) and pricing of 58.5bp over Australian government bonds.
Half-year results published by National Australia Bank (NAB) on May 9 further illustrate the rapid tightening of wholesale funding margins in recent months. However, outstanding debt issued in a higher spread environment means the NAB's average term funding cost across the portfolio has only recently stopped rising and will not fall significantly unless the current issuance environment is maintained or further improves.
On May 8, Westpac Banking Corporation (Westpac) (AA-/Aa2) priced self-led taps to two domestic issues – a dual-tranche May 2016 fixed and floating rate note (FRN) and a January 2018 FRN. The taps are the first increases of each line.
A projected return to surplus for the state government of Victoria in the 2015/16 financial year will see the funding requirement of Treasury Corporation of Victoria (TCV) fall below A$2 billion (US$2.04 billion), the corporation revealed on May 8. Analysts, ratings agencies and traders responded broadly positively to the May 7 Victorian state budget, especially the government's commitment to ongoing cost savings despite declining revenues and a challenging political position.
Bendigo and Adelaide Bank (BEN) (A-/A2/A-) priced a new four-year floating rate note (FRN) issue to the domestic market on May 8 – the bank's first domestic transaction since its three-year senior unsecured line in October 2012 and the second wholesale issue since Bendigo Bank and Adelaide Bank merged in November 2007.
J.P.Morgan Chase & Co (J.P.Morgan Chase) (A/A2/A+) priced a new five-year Kangaroo deal on May 7 in what will likely become the third Kangaroo from a US financial institution (FI) to price in 2013. Wells Fargo & Company was the first US FI to place bonds in the Australian dollar market this year, selling A$900 million (US$922.6 million) of five-year fixed- and floating-rate notes at 100 basis points over swap and bills on January 17. A week later Citigroup placed a A$500 million dual-tranche 2018 deal at 150 basis points over swap and bills.
The much-discussed trading of Australian Commonwealth government bonds (ACGBs) on the Australian Securities Exchange (ASX) will commence on May 21, the exchange and Australian Office of Financial Management (AOFM) revealed on May 8. The ASX will list CHESS depository interests (CDIs) on nominal and inflation-linked government bonds, allowing retail investors theoretical access to the full volume of outstanding securities.
Analyst responses to the May 7 rate cut by the Reserve Bank of Australia (RBA) largely coalesce around the view that the 25 basis point cut was a marginal call based on benign inflation conditions, with weaker employment data also contributing. Commentary points out the RBA's language in explaining the cut did not vary significantly from that outlining recent decisions to hold, supporting existing views on reserve bank tone.
Lend Lease Group (Lend Lease) issued its first-ever domestic bond issue in the Australian market late last week, citing a desire to diversify its funding base and a match with its maturity profile needs as the motivation for selecting Australian dollar issuance over appealing options elsewhere. The issuer says the transaction was met with strong demand and more AUD issuance is likely in order to fill further funding requirements.
Dexus Property Group (Dexus) returned to the US private placement (USPP) market at the start of the month, with the issuer citing favourable pricing as its motivation. The firm says its long-dated transaction was met with good demand and significant oversubscription.