News

Commonwealth Bank of Australia (CommBank) (AA/Aa1/AA) priced an increase to its September 2013 domestic line on September 7, in the bank's first public deal in the Australian market since it sold A$1.5 billion (US$1.4 billion) of three-year paper in early March. The bank sold the same volume in its latest deal, A$1 billion of that in the floating rate tranche.

The vogue for issuance from international borrowers, especially in the financial institution (FI) sector, added up to a monthly record for primary market volume from offshore credits in August. And while the opinions of market participants are divided on how much longer the trend will continue – or how strong the appetite is for FI Kangaroos – the first days of September continued to see offshore names active in Australia.

The run of Australian market issuance from international financial institutions (FIs) continued on September 2 as Bank of Scotland Australia Branch (BoS Australia) (A+/Aa3/AA-) launched and priced a new two year transaction. After pricing on the A$600 million deal, international FIs have sold over A$8 billion (US$7.3 billion) in Australia since early August, over A$6 billion of that via local subsidiaries.

European Investment Bank (EIB) (AAA/Aaa/AAA) launched and priced its first Kangaroo in nearly a month on September 1, adding A$600 million (US$538.9 million) to the August 2020 line it introduced in a A$1 billion (US$892.8 million) transaction in late July this year. EIB's last Kangaroo deal was a A$500 million 2015 tap that priced on August 5.

In the wake of a flurry of domestic deals from offshore banks, the financial institution (FI) Kangaroo market reignited on August 31 with Bank of America Corporation (BoA) (A/A2/A+) pricing A$1.2 billion (US$1.07 billion) in a new three-year deal. The transaction is just the third Kangaroo from a bank issuer this year and the first of its kind since a quickfire brace of issues priced in early March.

Market sources say a recent clarification of rules covering the capital treatment of securitised assets by the Australian Prudential Regulation Authority (APRA) could further challenge their issuance by banks. While the clarification does not directly affect the use of asset-backed securities (ABS) for funding, achieving capital relief via securitisation is unlikely unless issuing banks can sell a greater proportion of subordinated tranches than is typically the case.

One of the more interesting concepts for capital markets spun off the as-yet unresolved Australian federal election campaign was an opposition promise to direct the Australian Office of Financial Management (AOFM) to explore the issuance of 30-year government bonds. While participants say extending the government bond curve could have significant benefits for the Australian market, they also say the mechanics of doing so might prove complicated.

The Australian market for international banks continues to burn white hot with the August 31 pricing of a new five-year transaction from Credit Suisse Sydney Branch (Credit Suisse Sydney) (A+/Aa1/AA-). The deal is the issuer's second-ever Australian bond, following the pricing in March this year of A$1.1 billion (US$992 million) of four-year paper, at 120 basis points over swap.

In the first non-inflation linked domestic bond issue from an Australian higher education institution since 2006, on August 31 Macquarie University (Aa2) priced a new 10-year transaction. The issuer upsized the deal to A$250 million (US$223.35 million) from a launch minimum of A$200 million, retaining the indicative pricing of 170 basis points over swap.

Issuers and investors agree that developments in the Australian corporate bond market over the past year have been broadly positive, with increased communication between the buy and sell sides greeted as a particularly significant breakthrough. And while issuance still has significant ground to make up there is a strong consensus that the market has started heading in the right direction.