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After hopefully overcoming the worst of the COVID-19 pandemic, the Australian securitisation industry is taking stock of a period of resilience and a reshaped competitive landscape. Top of mind for market participants are the way crisis response has changed the cost of funding unevenly for different issuer types and mooted changes to responsible-lending rules.
The development of long-dated liquidity is a massive agenda item for the Australian debt market, as sovereign issuance soars and yield at the front end stays anchored. Local and global market participants shared views on how duration has evolved internationally and what might be in store for Australia, at a November KangaNews Debt Capital Markets Summit 2020 webinar.
Australia’s credit market has seen a pickup in supply of capital instruments, including a clutch of corporate hybrid transactions. The KangaNews Debt Capial Markets Summit 2020 webinar series included a session on additional capital, which focused on supply dynamics, demand drivers and the ever-present tension between retail, wholesale and true institutional participation.
Deal activity in the Australian market slowed to a trickle in the week prior to Christmas, with only International Finance Corporation printing two Kangaroo taps. KangaNews thanks its subscribers for their support in 2020 and will return in the first week of 2021.
Canberra Metro executed Australia’s first green loan for a public-private partnership (PPP) with a refinancing of Canberra’s electric light-rail system. Deal sources say the loan is not structurally unique from other certified green loans, but the application of labelled green finance to PPPs potentially opens a large pipeline of opportunities for banks and investors that are increasingly focused on green assets.
On 18 December, Australian Office of Financial Management (AOFM) (AAA/Aaa/AAA) revised down its planned issuance for the 2020/21 financial year to A$230 billion (US$175.4 billion) from A$240 billion, following the release of the federal government’s mid-year economic and fiscal outlook one day earlier.
On 16 December, executives at KfW Bankengruppe reviewed the 2020 funding year and shared their expectations for capital markets issuance to fund promotional activities in the year ahead. While recognising that investors are increasingly looking at issuer-level sustainability credentials, and working to enhance these, KfW also expects increased issuance of green bonds in 2021.
On 17 December, International Finance Corporation (IFC) (AAA/Aaa) launched a A$25 million (US$19 million) minimum increase to its February 2031 Kangaroo line. Indicative price guidance for the forthcoming deal is 30 basis points area over semi-quarterly swap, equivalent to 28.4 basis points area over Australian Commonwealth government bond. Pricing is expected on the day of launch, according to lead manager TD Securities.
On 16 December, New Zealand Debt Management (NZDM) revealed a NZ$5 billion decrease (US$3.5 billion) to its 2020/21 financial year borrowing requirement, following the New Zealand Treasury’s half-year economic and fiscal update. The reduction means gross New Zealand government bond (NZGB) issuance in 2020/21 is expected to be NZ$45 billion.
Along with travel and tourism, Australian universities have been one of the hardest hit sectors from COVID-19. But as a clearer picture of the industry’s outlook emerges, investors were comfortable to participate in domestic deals from Western Sydney University (WSU) and University of Wollongong (UOW).
The Green Bond Principles and Social Bond Principles (GBP SBP), administered by the International Capital Market Association, launched its Climate Transition Finance Handbook on 9 December. The handbook marks a new phase in the evolution of the sustainable finance market according to market participants involved in its development.