News

Investors in the US private placement (USPP) market continue actively to seek supply with most confident that last year's overall issuance volume – which reached close to US$50 billion – can be matched in 2011. With large portfolio managers reporting an almost even split between domestic and offshore allocations, there is also strong interest in further supply from the short list of preferred international jurisdictions – a list which includes Australia.

New South Wales Treasury Corporation (TCorp) (AAA/Aaa) has completed its half-yearly review of its 2010/11 budget, announcing that the semi-government's funding programme will remain unchanged from the target figure of A$10 billion (US$9.97 billion). The state funding agency tells KangaNews it is pleased with the increased number of offshore central banks participating in its deals, while it also hopes to increase its inflation-linked issuance.

On January 28, National Australia Bank (NAB) (AA/Aa1/AA) issued a new ¥56.3 billion (US$680.6 million) fixed and floating rate five-year Samurai bond, in the second Japanese transaction to come from a major Australian bank in 2011. The deal priced at the tight end of an original pricing guidance of 30-33 basis points over yen swap – with the issuer saying pricing is competitive to alternative markets – with both tranches achieving the same margins as ANZ's (AA/Aa1/AA-) January Samurai.

The Reserve Bank of New Zealand (RBNZ) announced the regulatory limit for covered bond issuance by local banks on January 21, with the cap – of 10 per cent of a bank's total assets – matching the hopes of domestic borrowers. The level is higher than the equivalent cap in other jurisdictions, and the limit – of 5 per cent – hinted at by the Australian federal treasurer, Wayne Swan, when he last year proposed the adoption of the asset class in Australia.

Recent predictions that Kangaroo deal flow in January would be down on the same month last year have been confounded, with the record for Kangaroo issuance in a single month being broken on January 20. The surprise factor appears to be consistently strong demand from the domestic investor base, with real money selectively joining a robust bank bid.

European Investment Bank (EIB) (AAA/Aaa/AAA) completed its second transaction of 2011 on January 21, in the form of a A$350 million (A$345.9 million) increase to its 2014 line. It also added a A$350 million floating rate note (FRN) tranche to the same maturity, following in the footsteps of Rentenbank - which issued a A$425 million FRN on January 19 - and Kommunalbanken Norway - which inaugurated a A$100 million FRN on January 18 before tapping it for the same amount two days later.

The Australian domestic corporate bond market has seen its first transaction in the month of January since 2003 with Volkswagen Financial Services Australia (VW) (A-/A3) pricing a new four-year bond on January 21. The deal achieved volume of A$150 million (US$147.7 million) including a A$50 million upsize from launch a day earlier.

The record for Kangaroo issuance in a single month has been broken, with KfW Bankengruppe (KfW)'s (AAA/Aaa/AAA) latest A$700 million (US$697.1 million) tap bringing January 2011's total Kangaroo volume to A$6.45 billion on January 20. The previous record was set in March 2010, when A$6.4 billion of Kangaroos were issued. And this month's volume is set to increase further, with another deal launched by European Investment Bank (AAA/Aaa/AAA) on the same day.

A second Canadian bank debuted as an issuer of covered bonds in the Kangaroo market, with Bank of Novia Scotia (Scotiabank) (AA-/Aa1/AA-, with covered bond programme ratings of AAA/Aaa/AAA) completing a A$1 billion (US$994.5 million) three-year transaction on January 20. The bank recently roadshowed in Australia but has previously never issued in the market in covered bond or unsecured format.

National Australia Bank (NAB) (AA/Aa1/AA) issued a new A$1.25 billion (US$1.25 billion) fixed and floating rate new line on January 19, in what is the second Australian dollar benchmark issued by a local big four bank in 2011. The deal is NAB's first benchmark in its domestic market since November 2010, when it sold A$1.3 billion in a fixed and floating rate September 2014 maturity tap.