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QTC borrowing increases as TCorp looks to CPI market |
Up to A$11.43 billion (US$10.92 billion) of Queensland Treasury Corporation (AAA/Aaa) (QTC)’s A$16.3 billion borrowing requirement for the 2008-9 financial year will be sourced in AUD term markets, according to the state treasury’s June 25 borrowing programme announcement.
QTC is not yet ready to comment on the likely impact on its benchmark bond line sizes of either its increased overall funding requirement – which will rise from A$13 billion in FY07/08 – or amendments to Australia’s interest withholding tax (IWT) regime which are expected to lead to the amalgamation of domestic and global bond programmes. While the IWT changes have been announced by legislators they are not expected to become law until later this year.
But an increase in total AUD bond issuance and the likely combination of AUD programmes is expected to have an impact; QTC anticipates raising a sum in the range A$9.8-11.43 billion in AUD-denominated bonds in the next financial year, compared to A$7.1 billion through its domestic programme in FY07/08.
However, with A$6.7 billion of debt maturing in 2008/9 QTC is understood to be focusing its efforts on lengthening and smoothing its maturity profile as well as simply adding volume in the most popular parts of the curve. The treasury has already met its dealer group to discuss the borrowing programme and strategy for the forthcoming financial year.
Despite the increase in overall funding requirement, QTC also believes there is potential room for flexibility in its issuance programme. A treasury statement explains that the state increased its liquidity horizon from six to 12 months earlier this year “in response to the significant level of uncertainty seen recently in global financial markets”, and that, as a result, “should market conditions normalise at some point during the 2008-9 borrowing programme period it may decide to revert to its usual six month liquidity horizon, which would release funds of up to A$2 billion”.
One way by which QTC may look to lengthen the duration of its funding is through increased inflation-linked issuance. The state brought A$275 million of CPI paper to market in FY07/08 and the treasury identified strong investor demand for this type of debt as a highlight of the year’s borrowing programme, saying volumes tendered were “significantly greater than the amount allotted”.
South of the state border, New South Wales Treasury Corporation (TCorp) aims to raise a minimum of A$600 million and possibly up to A$1 billion of its A$4.9 billion new funding requirement for FY08/09 through inflation linked issuance, and on June 27 it offered more details of how it plans to address that borrowing programme.
TCorp’s CPI borrowing will be based around four fixed date tenders of A$100 million set for issue on August 20 and November 20 this year and February 20 and May 20 2009. The remainder of its inflation-linked requirement will be filled according to state clients’ needs, although a treasury statement says deals are “likely to be limited to the existing 2025 and 2035 lines” and no paper will be brought to market within a week either side of the fixed date issues, “so as not to crowd supply”.
Overall, TCorp says recent months have been “encouraging” for its CPI programme – which has raised a total of A$903 million since its November 2007 inception – while the state also draws attention to the proposed abolition of IWT as a means to “widening the potential investor base”.
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Last Updated ( Friday, 27 June 2008 )
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