News
The disruption the accelerating COVID-19 crisis has sparked will test the resilience of the Australian securitisation market, even though risks to credit quality may be limited. Issuers may have to increase their usage of alternative funding options should the public market remain inaccessible for an extended period.
During a week of significant global market volatility caused by the evolving COVID-19 crisis, deal activity trickled through in Australia. Six reverse-enquiry, sovereign, supranational and agency transactions totalling A$575 million (US$362.6 million) were printed after opportunities emerged in the short end of the Australian dollar basis swap curve.
On 13 March, Bank of Queensland (BOQ) announced plans for a refinancing of its residential mortgage-backed securities (RMBS) deal, REDS Trust 2015-1. The offer is a Class A-R note of A$233.3 million (US$147.2 million), with launch expected in the week beginning 16 March. ANZ, National Australia Bank and Westpac Institutional Bank are leading.
On 13 March, Macquarie Bank (A+/A2/A) announced the withdrawal of its A$500 million (US$313.8 million) offer of additional tier-one (AT1) capital, made 11 February and due to be issued 18 March. In a statement to the ASX, Macquarie Bank says the decision to withdraw was made considering significantly changed market conditions in recent weeks.
On 12 March, National Australia Bank (NAB) (AA-/Aa3/AA-) announced the withdrawal of its offer of additional tier-one (AT1) capital, made 25 February and due to be issued 23 March. In a statement to the ASX, NAB says it recognises market conditions have changed substantially since the offer was launched and ongoing market volatility would likely impact on the trading value of the notes.
The Australian Office of Financial Management (AOFM) (AAA/Aaa/AAA) announced that it will increase the volume of Treasury bond tenders in response to the federal government stimulus package announced on 12 March. The AOFM plans to issue A$1.2-1.6 billion (US$773.7 million – US$1 billion) in “most coming weeks” before updating its ongoing funding plan following the delivery of the 2020/21 federal budget in May.
The New Zealand dollar corporate market appears to have battened down the hatches as COVID-19 has impinged on global markets. The specifics of local demand have shielded New Zealand from global volatility on occasion but market participants say the low-rate environment now leaves it more vulnerable to global moves.
As high-grade bonds have rallied globally in response to the COVID-19 crisis, opportunities have emerged in the short end of the Australian dollar basis swap curve.
The Reserve Bank of New Zealand (RBNZ) has released a paper on the principles that would guide its potential use of unconventional monetary policy tools. There is no specific guidance on how the central bank might combat fallout from COVID-19.
