News

First half issuance in New Zealand was steady to slow, with total primary market deal flow across the domestic and Kauri sectors of NZ$3.86 billion (US$2.63 billion) – lower, though not by far, than any of the previous four periods. Domestic issuance in the past six months has been characterised by the relative reduction in the proportion of bank bonds issued with the local government and corporate sectors increasingly prominent.

Despite ongoing volatility and the near shutdown of the market in May, the first half of 2010 saw record issuance in the Australian vanilla credit and Kangaroo markets. Total domestic issuance for the half year, including securitisation but excluding government and semi-government activity, reached A$51.17 billion (US$42.6 billion) – roughly in line with the pre-GFC norm.

Westpac Banking Corporation (Westpac) (AA/Aa1) priced a 2015 maturity domestic deal on June 29 in just the second unguaranteed five-year from a financial institution (FI) in Australia this year. The bank sold A$300 million (US$259.29 million) of fixed rate notes at 135 basis points over swap and A$500 million of floating rate paper at the same margin to bank bill swap rate (BBSW).

The five-year domestic bond issue first sounded by Sydney Airport Corporation (Sydney Airport) (BBB/Baa2/BBB) in early May, then postponed as European-centred volatility gripped the market, placed volume of A$175 million (US$152.7 million) on June 28. The transaction is part of a buyback and exchange transaction for two outstanding credit-wrapped lines from the same issuer, due in November 2011 and December 2012.

ME Bank plans to include a US dollar tranche in a residential mortgage-backed securities (RMBS) transaction it expects to price next week. No Australian issuer has sold foreign currency-denominated securitisation product since the last euro tranches were included in a deal, in July 2008, while there has not been a US dollar offering since May 2007.

With issuance emerging across sectors in the past week, market participants in Australia say the deal pipeline is building. While confidence is only starting to return and investors say caution still reigns, the first domestic bank benchmark and the first public corporate deal since April are expected to be a sign of things to come rather than a flash in the pan.