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The week beginning January 16 saw the first Australian dollar deals of the year from domestic issuers. The first-ever covered bond from a domestic major bank was issued, and another is soon expected to come to market. The first Australian corporate deal of 2012 was also priced.

Westpac Banking Corporation (Westpac) has issued a A$3.1 billion (US$3.3 billion) Australian dollar covered bond transaction. The transaction is the second domestic deal issued by a major bank, following a A$3.5 billion dual-tranche deal issued by Commonwealth Bank of Australia on January 17.

In the wake of the state of Queensland's mid-year budget update the state's treasurer, Andrew Fraser, tells KangaNews in an exclusive interview that maintaining the fiscal discipline required to regain a triple-A rating remains a policy goal of the government. Measures towards this goal have led to an improved budget and funding position, even as Queensland approaches a state election in 2012.

The issuer and lead managers of the first domestic covered bond from an Australian bank say the deal's pricing was appropriate to both a new asset class transaction and offshore comparables. The issue margin was notably wider than secondary spreads on Australian major bank senior unsecured paper, but deal participants point to the huge volume of the covered bond transaction and its wide investor base as proof of its successful execution.

The most recent round of downgrades to European sovereigns by Standard & Poor's (S&P) – most significantly affecting the ratings of Austria and France – has caused A$2.45 billion (US$2.54 billion) of supranational, sovereign and agency (SSA) Kangaroo paper to lose its AAA status. The second largest Kangaroo borrower, European Investment Bank (EIB), has maintained its top S&P rating albeit with negative outlook.

Lead managers on the A$350 million (US$363.9 million) new four-year Kangaroo priced on January 17 by Industrial Bank of Korea (IBK) (A/A1) believe banks from Asia – especially Korean names – will seek to emulate the success of the upsized transaction. Although a clutch of Asian financial institutions priced domestic deals via their Australian branches in 2011, IBK's issue is the first true Kangaroo from an Asian credit since May 2007.

Commonwealth Bank of Australia (CommBank) has become the first Australian bank to issue a home-currency covered bond, having completed a A$3.5 billion (US$3.6 billion) transaction in the week beginning January 16. CommBank recently made its covered bond debut in the euro market, pricing a €1.5 billion (US$1.9 billion) five-year deal on January 4.

The January 12 transaction placed by KfW Bankengruppe (KfW) (AAA/Aaa/AAA) illustrates the ongoing reality of wider Kangaroo pricing for European supranational, sovereign and agency (SSA) issuers than is available in other benchmark markets. KfW says its strategic view on the Australian dollar made it happy to bring the transaction, which was predominantly sold to international investors.

The week beginning January 9 saw the pricing of the first Australian public deal of the year, in the form of a Kangaroo tap. While other sectors remained quiet, several of the Australian major banks continued to issue transactions offshore.

The first Kangaroo transaction of 2012 was priced by KfW Bankengruppe (KfW) (AAA/Aaa/AAA) on January 12 as a tap to the borrower's May 2021 bond. The A$250 million (US$257.4 million) takes the total line size to A$1.85 billion. The line was most recently tapped in October last year.

The year of 2012 opened quietly as expected. However, falling in line with historical norms, two of the major Australian banks completed offshore transactions as Commonwealth Bank of Australia and National Australia Bank issued their debut euro covered bond deals.

Commonwealth Bank of Australia (CommBank) (AA-/Aa2/AA) has become the final major Australian bank to complete its debut covered bond transaction, pricing a €$1.5 billion (US$1.9 billion) five-year deal on January 4. It was also the first covered bond issued by an Australia big four bank into the European market, and CommBank's Sydney-based group treasurer, Lyn Cobley, tells KangaNews that market was targeted for the wider distribution and larger volume available.