Mid-curve Kangaroo market pricing has swung back into a range that some global supranational, sovereign and agency (SSA) borrowers consider to be an acceptable premium for diversification purposes, market participants say. A recent-year issuance decline shows signs of having bottomed out – though it is yet to rebound – and market users say demand for the SSA product is steadily broadening.
On 6 April, Australian Capital Territory (ACT) (AAA by S&P) revealed plans for a potential Australian dollar denominated, syndicated, dual-tranche transaction. Alongside an increase of the May 2029 line, the offer consists of a new three-year bullet, fixed-rate benchmark or a tap of the May 2024 maturity. ANZ, Deutsche Bank, UBS and Westpac Institutional Bank are leading.
On 9 March, Metro Finance mandated Deutsche Bank and National Australia Bank to arrange a series of investor meetings in Sydney and Melbourne beginning 12 March regarding a potential auto and equipment asset-backed securities (ABS) transaction.
Demand for syndicated primary issuance of semi-government paper continued through at least the last week of February, driven by relative value in the sector, a lack of other high-grade supply and, most recently, investor flight to quality.
On 2 March, expected ratings were assigned by S&P Global Ratings and Moody's Investors Service to AMP Bank's potential residential mortgage-backed securities (RMBS) deal, Progress 2020-1 Trust. The deal has indicative total volume of A$750 million (US$489.2 million). Commonwealth Bank of Australia, Deutsche Bank, Macquarie Bank, MUFG Securities, National Australia Bank and Standard Chartered were mandated for the deal on 20 February.
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.