News
The week beginning November 28 saw just one public primary transaction price in the Australian market, although an exchange offer of tier two paper was opened on December 2. Across the Tasman, no new deals emerged this week.
Concerns about a renewed funding squeeze in global commercial paper (CP) markets do not appear to be hurting the Australian majors at this stage. While funding sources emphasise the volatility of the international environment they also say that, so far, short-term pricing and capacity has held up as the Australian banking sector has been a beneficiary of investors' reallocation away from European names.
As a result of amplified volatility, the week beginning November 21 saw very little public primary market activity in both Australia and New Zealand. Just one residential mortgage-backed securities deal priced as market participants nervously await greater stability.
The reorganisation of Commonwealth Bank of Australia (CommBank)'s debt operations appears to be ongoing, with the bank refusing to disclose full details of the changes before internal discussions have been completed. The key feature of the reorganisation for CommBank's debt business is the alignment of DCM origination with other debt origination as part of the bank's corporate finance business, thus separating origination from DCM syndication and sales – which join fixed income trading under the markets banner.
Discussion on the second day of the Australian Securitisation Forum (ASF)'s annual conference focused on the investor universe on- and offshore in an environment of seemingly never-ending market dysfunction. Borrowers say flexibility of funding options, in a world where disparate investor bases are offering unpredictable price points and unreliable execution capacity, will be key.
Lower-than-expected volume of covered bond issuance by the major Australian banks last week has caused the AUD/USD basis swap to narrow by at least 14 basis points in the past few days and consequently worsened Kangaroo issuance economics. However, intermediaries say the larger problem is seemingly relentless extreme spread widening – which has taken issuance off the table for Kangaroo borrowers for the foreseeable future and may change the characteristics of the market entirely going forward.
Suncorp-Metway (Suncorp) priced a new A$1.25 billion (US$1.2 billion) prime residential mortgage-backed securities (RMBS) deal on November 23. The transaction was upsized from a launch volume of A$750 million and is Suncorp's first RMBS since it issued a A$1 billion deal in May 2010.
A trio of supervisory heavyweights headlined the first day of the Australian Securitisation Forum (ASF)'s annual conference on November 21 – but the content of the day's discussions was as much about the future makeup of bank funding and the Australian sector's global investor base as the details of regulation. Overall, regulators believe there should be a role for securitisation in future, but only as part of a multi-faceted funding mix that now also includes covered bonds.
Discussion on the second day of the Australian Securitisation Forum (ASF)'s annual conference focused on the investor universe on- and offshore in an environment of seemingly never-ending market dysfunction. Borrowers say flexibility of funding options, in a world where disparate investor bases are offering unpredictable price points and unreliable execution capacity, will be key.
Insurance Australia Group (IAG) set the final rate on its subordinated bond in New Zealand on December 15. The offer opened on November 16 and was initially targeting a volume of NZ$250 million (US$188.7 million), but was upsized to NZ$325 million as a result of oversubscription during the bookbuild process. The minimum interest rate until the first call date, in December 2016, has been set at 7.5 per cent based on the offer's close on December 12.
Westpac Banking Corporation (Westpac) became the second Australian bank to complete a covered bond, printing a US$1 billion issue on November 17. Following ANZ Banking Group (ANZ)'s deal two days earlier, Westpac also chose the US market to make its debut thanks to the more appealing cost of funds sourced in US dollars.
ANZ has appointed a new global head of debt origination and head of capital markets Asia, with Michael Luk set to commence the role on November 23. In the Hong Kong-based position Luk will replace Reuben Tucker, who is returning to his native New Zealand having held the Hong Kong job for three yeas. He will continue to work for ANZ.