News
A tight cross-currency basis swap at the start of 2020 is limiting the opportunities that usually exist for offshore borrowers in Australian dollars at the start of each year. Traders expect pressures in short- and long-term funding markets to continue to influence the basis, which could pose an ongoing challenge for Kangaroo issuance.
Australia’s big-four banks took advantage of strong demand and tight pricing in global markets in the first month of 2020. All major funding options and investor types provided strong demand but US dollars has been a standout.
On 25 February, Queensland Treasury Corporation (QTC) (AA+/Aa1/AA) launched a new July 2034, Australian dollar denominated, syndicated, benchmark deal. Indicative price guidance for the forthcoming deal is 82.5-86.5 basis points area over 10-year futures contract, equivalent to 62.1-66.1 basis points area over Australian Commonwealth government bond. Pricing is expected on the day after launch, according to Citi, Deutsche Bank and Westpac Institutional Bank.
In January 2020, KangaNews convened its annual roundtable of Australian major-bank rates strategists to discuss the outlook for the local government-sector bond market. There is a degree of confidence in the outlook for bond performance. Immediate ends to Australia’s sluggish growth profile and dovish rates outlook are less likely.
On 24 February, following the completion of a bookbuild, National Australia Bank (NAB) revealed it has increased the volume of its additional tier-one (AT1) capital deal to at least A$1.95 billion (US$1.3 billion) from A$750 million. The margin has been set at 295 basis points over three-month bank bills.
On 24 February, Frasers Property mandated ANZ, Barclays, HSBC, National Australia Bank and Oversea-Chinese Banking Corporation (OCBC) for a potential long-dated, Australian dollar denominated sustainability bond. ANZ, Barclays and OCBC have also been appointed as sustainability structuring advisors.
On 24 February, Columbus Capital launched its residential mortgage-backed securities (RMBS) deal, Triton 2020-1. Total indicative volume for the forthcoming deal is A$500 million (US$330.1 million), with the ability to upsize to A$1 billion, and is expected to price on 28 February. National Australia Bank is arranger and joint lead manager alongside Standard Chartered and Westpac Institutional Bank.
Liberty Financial (Liberty) has long held the objective of issuing senior-unsecured paper at five-year tenor. The issuer took another step in that direction with its first four-year deal, printed on 18 February.
On 24 February, Kiwibank (A/A1/AA-) mandated ANZ and UBS to arrange a series for investor meetings and calls in Australia and Asia in the week beginning 2 March regarding a potential five-year, Kangaroo, senior-unsecured transaction.
New Zealand’s sovereign and semi-government issuers are facing some of the same challenges as their Australian peers, most notably declining relative yield and larger issuance tasks driven by infrastructure investment. But the trans-Tasman stories are not identical, as New Zealand’s issuers explained at a KangaNews roundtable in Wellington in January.
On 24 February, Queensland Treasury Corporation (QTC) (AA+/Aa1/AA) revealed plans for a new Australian dollar denominated, syndicated transaction, in either or both 14.5-year and 20-year tenor. Citi, Deutsche Bank and Westpac Institutional Bank have been mandated for the deal.
Deal activity in the Australian market continued its strong showing in the third full week of February. On top of several deals from semi-government issuers, the Australian Office of Financial Management, having last undertaken a syndicated deal in September 2018, printed a A$2 billion (US$1.3 billion) syndicated tap of its May 2041 maturity.