News

On October 7 the World Bank (AAA/Aaa) priced A$1.4 billion (US$1.25 billion) in a five- and 10-year maturity Kangaroo deal. This is the largest volume sold in a single Kangaroo market transaction from a supranational, sovereign and agency (SSA) issuer although even the larger of the two tranches – A$800 million of 2014 bonds – remains smaller than the all-time record single maturity SSA Kangaroo, Asian Development Bank's A$1 billion five year from 1998.

Having initially proposed the restriction of the list of securities considered liquid for local banks' risk management purposes to a short list of government debt instruments, UK regulator the Financial Services Authority (FSA) has broadened the list in the final version of its new liquidity requirements to include both Australian government bonds and those issued by "multi-lateral development banks".

Inter-American Development Bank (IADB) (AAA/Aaa/AAA) priced the fourth Kangaroo deal in two days on October 2, adding A$250 million (US$217.46 million) to its May 2014 line and bringing the size of the line to A$1 billion in the process. The deal priced at a margin of 65 basis points over the June 2014 Australian government bond, which rate sheet data suggests equates to high single figures basis points over swap.

A NZ$150 million (US$106.74 million) 2014 wholesale transaction from Waitakere City Council (Waitakere) (A+) is the largest of a trio of recent deals from New Zealand local authority issuers, with the deal's lead manager saying the sector might finally be primed to start meeting some of the unfulfilled demand for semi-government issuance in New Zealand.

The third Kangaroo priced on October 1 came from European Investment Bank (EIB) (AAA/Aaa/AAA), which increased its March 2019 bonds by A$600 million, bringing the total outstanding in this line to A$1.65 billion. The increase, led by RBC Capital Markets (RBC), priced at "low 20s" over swap according to Eila Kreivi, head of funding for the Americas and Asia Pacific at EIB in Luxembourg.

Offshore demand drove the A$500 million (US$440.85 million) increase to KfW Bankengruppe (KfW)'s (AAA/Aaa/AAA) 2015 Kangaroo line, with the outstanding size of the bond reaching A$1 billion after the tap. After three quiet weeks there have now been four Kangaroo transactions from three issuers in three days, with a total of A$2 billion of paper being priced since September 29.

On October 1 German development agency Rentenbank (AAA/Aaa/AAA) brought the size of its July 2014 Kangaroo line to A$1 billion (US$879.6 million) with a A$350 million increase. The issuer inaugurated the five-year bond in a A$550 million deal on July 2 this year and has brought it to benchmark size with the line's second tap.

The recent pickup in deal flow continued on October 1 with ABN AMRO Bank Australian Branch (ABN) (A+/Aa2/AA-) pricing A$600 million (US$527.22 million) of 15-month floating rate notes covered by the Australian government guarantee. The January 2011 maturity transaction priced at a margin of 25 basis points over three-month bank bill swap rate (BBSW).

With the government guarantee still boosting funding, the third quarter of 2009 saw the greatest ever volume of domestic issuance in the Australian bond market. The A$25.73 billion (US$22.64 billion) priced by non-government domestic issuers surpassed Q1's figure of A$24.1 billion and nearly doubled the level of activity seen in any three-month period prior to this year.

The Australian Office of Financial Management (AOFM) says the scale of demand for its A$4 billion (US$3.54 billion) Treasury Indexed Bond (TIB) transaction has given the agency pause for thought regarding the significance of the asset class within its overall portfolio, especially as there is a further group of offshore investors who should start buying the product when the removal of interest withholding tax (IWT) is official.

In its first inflation-linked transaction for six years the Australian Office of Financial Management priced A$4 billion (US$3.52 billion) in its new 2025 Treasury Indexed Bond (TIB). Distribution of the deal is understood to have been predominantly onshore, although there was also – as expected – a significant bid from international investors.

The Australian Office of Financial Management (AOFM) announced the identity of three more firms from whom it will support residential mortgage-backed security (RMBS) deals on September 30; all three are, as expected, non-authorised deposit-taking institutions (ADIs) and all have also been the recipient of government RMBS support before.