News
The Reserve Bank of New Zealand kept the official cash rate (OCR) on hold – at 2.5 per cent – at its January monetary policy meeting, while ramping up its easing bias. Analyst views are divided when it comes to the reserve bank's inflation view, as some see inflation as a clear drag on the OCR while others read into the post-decision statement a degree of comfort with core inflation.
On January 27, Royal Bank of Canada Sydney Branch (RBC Sydney) (AA-/Aa3) launched and priced a new, Australian dollar senior-unsecured domestic benchmark transaction. According to KangaNews data, the deal marks the fifth time the borrower has issued in the domestic market.
The four Kauri transactions printed in the month so far match a record for January, and New Zealand intermediaries say solid on- and offshore demand continues to underpin high-grade Kauri deals. But they also have reasons to expect a moderate year for supranational, sovereign and agency (SSA) volume – and not just because of wider market turbulence.
The third week of January saw the Australian Office of Financial Management print A$4.6 billion (US$3.2 billion) in a 2027 nominal bond and ANZ Banking Group price a A$1.4 billion three-year senior domestic deal. More broadly though, both Australia and New Zealand saw a reduced level of deal flow this week.
Issuer and lead managers on the Australian Office of Financial Management (AOFM)'s first syndicated nominal bond deal of 2016 suggest a flight to quality helped shelter the deal from the wider impact of market volatility. A strong domestic bid reinforces the notion that investors are staying close to home as global storms rage.
ANZ Banking Group (ANZ) (AA-/Aa2) priced a new self-led, three-year, senior-unsecured transaction on January 20. The deal is ANZ's first public transaction in the domestic market this year and the second of 2016 from a major bank, after Commonwealth Bank of Australia priced a A$2 billion (US$1.4 billion) five year on January 12.
On January 20, the Australian Office of Financial Management (AOFM) (AAA/Aaa/AAA) priced the new November 2027 nominal bond it mandated in the second week of January. Initial price guidance for the syndicated issue was a spread of 13.5-17.5 basis points over the implied bid yield for the primary 10-year Treasury bond futures contact.
Province of Manitoba (Manitoba) (AA/Aa2) priced an increase of its June 2026 Kangaroo bond on January 20. According to KangaNews data, the deal is the first tap to a line which was introduced in December 2015 at volume of A$70 million (US$48.3 million) and pricing of 90.75 basis points over Australian Commonwealth government securities.
On January 19 Export Development Canada (EDC) (AAA/Aaa) priced an increase of its May 2020 Kauri. EDC's May 2020 line, its longest outstanding Kauri bond, was introduced in April last year at NZ$300 million (US$192.8 million) with pricing of 17 basis points over mid-swap.
On January 19, home builder Impact Group (NR) revealed plans to issue a new five-year bond with target volume of A$40 million (US$27.5 million). Impact Group's bonds will offer an indicative coupon of 8.5 per cent, according to lead manager, FIIG Securities.
In a turnaround from 12 months ago and despite widening global spreads, Commonwealth Bank of Australia (CommBank)'s domestic market return highlights the advantage offered by domestic market pricing over offshore alternatives. But execution caution and capacity constraints continue to be important considerations.