News
Australia's federal opposition has offered in-principle support to legislation, slated for early 2011, that will for the first time allow domestic authorised deposit-taking institutions (ADIs) to issue covered bonds. In a statement, the shadow treasurer, Joe Hockey, highlights covered bonds as one of two specific measures included in the government's banking sector reforms package that the opposition welcomes.
The Australian Securitisation Forum (ASF) issued an immediate positive response to the December 12 announcement of a raft of government measures to support and expand the Australian asset-backed market via both securitisation and the introduction of covered bonds. An ASF statement says the organisation is "delighted that the government acknowledges the vital and productive role that securitisation plays".
Australian federal Treasurer, Wayne Swan, revealed the government's long-awaited banking system reforms on December 12. Among a raft of significant measures, Swan proposes that Australian financial institutions (FIs) should be allowed to issue covered bonds and that exchange trading of government bonds be introduced to help plans to develop a deep and liquid corporate bond market.
In line with plans revealed by the regulator at the end of November, on December 10 the Australian Prudential Regulation Authority (APRA) sent a letter to banks explaining its revised capital relief approach to securitisation. The new policy offers authorised deposit-taking institutions (ADIs) a deduction from tier one capital requirements relating to the volume of subordinated securitisation tranches they have to retain on balance sheet.
Australian market intermediaries are confident the level of investor appetite for corporate credit they have already seen in 2010 could double the year's issuance volume if enough deals are offered in domestic format. With local execution risk apparently fading as a concern among corporate borrowers, market participants believe issuance will come from a wider sphere of names – including the top tier of Australian corporates.
Wide Bay Australia (Wide Bay) has launched a new residential mortgage-backed securities (RMBS) deal, with an indicative volume of A$250 million (US$245.9 million) across four tranches. WB Trust 2010-1 is the third asset-backed deal to come to the market this week, following hot on the heels of the launch of a Bendigo and Adelaide Bank RMBS and an automotive asset-backed securities deal from Capital Finance Australia.
Australian Rail Track Corporation (ARTC) (Aa2) priced its inaugural domestic medium-term note (MTN) transaction on December 9, with the size of the issue increased to A$200 million (US$195.6 million) and its margin tightened by 5 basis points to 145 basis points over swap. The seven-year deal was launched a day previously at an indicative volume of A$150 million.
The asset-backed market continues to see activity in the last weeks of 2010 with two new deals launching in recent days and at least one more possibly to come before year end. The most recent residential mortgage-backed securities (RMBS) launch, from Bendigo and Adelaide Bank (BEN) on December 7, features an innovative capital structure with more than 50 per cent of the trade made up of a series of bullet tranches.