News
Testimony from the Reserve Bank of Australia (RBA)'s governor, Glenn Stevens, to the Australian House of Representatives Standing Committee on Economics has been interpreted by analysts as indicating less aggressive rate cutting expectations on the reserve bank's part than are being priced in by markets. In his testimony Stevens also drew reference to the Australian banking system's stable funding position and the absence of "abnormal" liquidity demands being made to the RBA.
Primary market deal flow in Australia and New Zealand remained minimal in the past week, with two Kangaroo deals and the third commercial mortgage-backed securities issue of the year the only transactions pricing. In New Zealand, a forthcoming retail transaction was confirmed but no public market transactions priced.
Fund managers in Australia and New Zealand agree that ongoing volatility, rather than a fundamental revision of their credit outlook, remains the main barrier to primary market issuance. And while there is an expectation that wider spreads should result in more favourable pricing for investors, the wide-scale withdrawal of funds from the fixed income sector witnessed in 2008 has, so far, yet to recur.
Demand for the recent burst of floating rate note (FRN) issuance from Australian semi-government borrowers appears to have come from a small group of investors, and market participants say widespread growth of the product seems unlikely. However, the states that have issued in floating format appreciate the opportunity to fund, and diversify funding sources, in a difficult market, adding that they are happy to consider its use in future.
The Australian tier one market kicked into gear on August 23 as ANZ (AA/Aa2/AA-) announced the offer of a new convertible preference shares (CPS) transaction. Having launched the offer at a volume of A$750 million (US$784.3 million), ANZ upsized the deal to A$1.34 billlion due to "strong investor demand".
The Australian securitisation market saw its first primary transaction since late July with the August 23 issue of a new commercial mortgage-backed securities (CMBS) offering from IMB. The deal, which achieved its indicative volume of just more than A$200 million (US$208 million), is the third Australian CMBS this year and is IMB's first commercial mortgage securitisation since 2007.
Another slow issuance week sees little movement in KangaNews's intermediary league tables, with the most significant change coming in New Zealand. Although just a single new transaction priced in the week ending August 19, the NZ$200 million (US$163.3 million) placed by Rabobank Nederland New Zealand Branch (AAA/Aaa) is enough to take its sole lead, ANZ, to the top of the New Zealand domestic league table.
Z Energy (NR) (formerly Greenstone Energy) closed its retail bond offering on August 5, pricing NZ$150 million (US$123 million) of retail bonds - NZ$50 millin more than the initial target. The company says the funds will be used to pay down bank debt and provide a more flexible corporate funding structure.
On September 29 Air New Zealand (Baa3, negative outlook) issued its debut transaction in the New Zealand domestic bond market. The NZ$150 million (US$114.9 million) bonds have a coupon of 6.9 per cent and a maturity of November 2016. The offer opened on September 5 and closed on September 23.