News
Non-residential mortgage-backed securitisation volume is significantly down in 2018 compared with recent years – primarily, sources insist, as a result of lack of supply by regular bank issuers. However, recent nonbank issuers in the auto asset-backed securities (ABS) space say investors are still eager for diverse product, resulting in well supported deals.
On 13 December, following the New Zealand government’s half year economic and fiscal update, New Zealand Debt Management Office (NZDMO) revealed an unchanged core Crown borrowing programme for the 2018/19 financial year, at NZ$8 billion (US$5.5 billion). Around NZ$1 billion of the issuance programme is expected to be undertaken in inflation-indexed bonds.
The international bank debt-issuance market is constantly evolving, with the emergence of total loss-absorbing capacity (TLAC) and renewed volatility among 2018’s most notable developments. KangaNews speaks to funding executives from Asia, Australia, Europe, Japan and North America to get the latest on market conditions and outlook.
Australia’s big-four banks could triple their issuance of tier-two instruments to meet the local equivalent of a total loss-absorbing capacity (TLAC) regime, according to the Australian Prudential Regulation Authority (APRA).
There is no Australian equivalent of a total loss-absorbing capacity (TLAC) regime, and even when one is implemented it does not currently appear that it will create a new type of additional-capital security as has been the case in most global jurisdictions. This has not stopped international banks issuing TLAC-compliant senior debt denominated in Australian dollars.
Canadian banks have been a reliable source of supply to the Australian dollar market since the financial crisis, initially focused mainly on covered bonds but increasingly in recent years in senior-unsecured format. The Australian market has proved fruitful for Canadian issuers both via local branches and in Kangaroo format.
So far, the only banks to have issued sustainability-themed bonds denominated in Australian dollars have been domestic institutions – just one of the reasons why deal volume has yet to catch fire. One positive sign is the conduciveness of the Australian dollar market for high-grade issuers, including to global supranational, sovereign and agency names.
On 11 December, Province of Manitoba (A+/Aa2) launched a minimum A$30 million (US$21.6 million) increase to its August 2028 Kangaroo bond, via ANZ. The forthcoming deal is being marketed at 59 basis points area over semi-quarterly swap. Pricing is expected on the day of launch.
Key data and information on 23 global bank issuers active in the Australian dollar market. The issuer section includes funding strategy information as well as corporate debt data on profiled borrowers.
On 10 December, National Australia Bank (NAB) launched its residential mortgage-backed securities (RMBS) deal, NRMBS 2018-2. The forthcoming transaction is capped at A$1.63 billion (US$1.2 billion) and is expected to price on or before 13 December. NAB is sole arranger and lead manager.
Global issuance by financial institutions (FIs) has been informed in recent years by regulatory requirements implemented in the decade following the 2008 financial crisis. The reshaping of banks’ capital structures is now largely complete in most jurisdictions and the market is reaching a new equilibrium. But challenges – including macroeconomic conditions and benchmark reform – remain on the horizon.