News
Having widened to record levels for deals priced at the beginning of 2012, primary market margins for Australian banks have in the past week continued their tightening bias in both on- and offshore markets. The most recent benchmark trades are National Australia Bank (NAB)'s senior unsecured – the first of the year in the domestic market from a big four bank – and Westpac Banking Corporation (Westpac)'s euro covered bond debut.
A robust bid for Asian credits in Australian dollars – which has so far this year led to a pair of Korean financial institution (FI) transactions for a total of A$600 million (US$648 million) – could prompt more Asian deal flow. And some intermediaries believe the universe of potential bank issuers, both from Korea and wider Asia, is sufficiently limited that non-financial corporates could see value in meeting the AUD demand.
The Australian major bank senior unsecured market reopened on February 8 as National Australia Bank priced the first such deal of 2012. There was also multi-sector Kangaroo activity and a single syndicated transaction from an Australian semi-government borrower. Meanwhile, results season spurred a host of ratings affirmations.
The Reserve Bank of Australia (RBA)'s surprise decision to leave cash rates unchanged at 4.25 per cent at its February 7 meeting has caused some strategists to reduce their expectations for the extent of rate cuts likely in 2012. While acknowledging that the outcome in Australia will be dictated to a large extent by global events, the tone of several research reports released after the RBA announcement leans towards reduced rate cut expectations.
KfW Bankengruppe (KfW) (AAA/Aaa/AAA), so far the only supranational, sovereign and agency (SSA) borrower to tap the Kangaroo market in 2012, priced its third transaction of the year on February 7. The German agency increased its February 2018 Kangaroo to A$2.05 billion (US$1.67 billion) outstanding via the addition of A$500 million.
The first Kauri deal of the new year priced on February 8 as World Bank (AAA/Aaa) priced an increase to its existing August 2016 line. The tap was upsized to NZ$325 million (US$271.5 million) from NZ$200 million at launch, and added to a line which World Bank introduced in August last year as its only Kauri transaction of 2011.
Following the pricing of Industrial Bank of Korea (IBK)'s (A/A1) A$350 million (US$375.2 million) Kangaroo debut on January 17, Korea Finance Corporation (KoFC) (A/A+) priced its own inaugural Kangaroo transaction on February 7. Following completion of the latest deal, 2012 has become the first year in which more than a single Asian financial institution (FI) Kangaroo has priced since 1996.
The issuer of the largest floating-rate note (FRN) transaction issued by an Australian semi-government, Treasury Corporation of Victoria, says the investor base for its most recent deal was notably wider than was the case in previous such transactions. It also, unlike other FRNs issued by Australian states in recent times, saw a significant domestic bid.
More deal flow emerged in the Australian domestic market at the turn of the second month of the year, with a number of semi-government placements and the second transactions of 2012 from both the domestic corporate and high-grade Kangaroo sectors. Perhaps the most significant transaction, though, was the first domestic senior unsecured bank deal of the year.
The issuer of Australia's first domestic senior unsecured bank deal of 2012, Rabobank Nederland Australia Branch (Rabobank Australia), says the transaction demonstrates the ongoing investor support for the asset class despite the recent issuance focus on covered bonds. While price discovery was challenging given the lack of recent comparable transactions, Rabobank Australia also says the February 2 tap to its April 2015 line attracted broad demand.