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Moody’s Investors Service (Moody’s) placed the state of Queensland (AA+/Aaa/AAA) and its funding agency, Queensland Treasury Corporation, on review for possible downgrade on February 27, following the lead of Standard & Poor’s (S&P) which downgraded both state and treasury a week earlier.

Westpac Banking Corporation (AA/Aa1) (Westpac) became the last of the Australian big four banks to bring a domestic benchmark transaction under the terms of the local sovereign guarantee on February 26 with the pricing of a A$1.925 billion (US$1.24 billion) five-year fixed and floating rate deal.

The chief executive of the Australian Securities Exchange (ASX), Robert Elstone, has called for longer-dated commonwealth government security (CGS) issuance as part of a predicted “more buoyant fixed income market in Australia over coming years”. Elstone believes investment in new energy sources and technologies will necessarily be driven by the fixed income market.

Standard & Poor’s (S&P)’s decision to downgrade the state of Queensland and its funding authority, Queensland Treasury Corporation (QTC), to AA+ may not be the first in a wave of downgrades to Australian semi-governments, although the rating agency acknowledges there is “only downside risk” in state revenue projections.

The ongoing difficulty of refinancing residential mortgage backed securities (RMBS) in troubled capital markets has caused Challenger Securitisation Management (Challenger) not to exercise early call options on three of its outstanding deals – a decision which some investors believe has further set back the already dislocated asset-backed market.

On February 20 Macquarie Bank (Macquarie) (A-/A2) priced A$1.1 billion (US$702 million) of February 2014 bonds guaranteed by the Australian government. This is the first public domestic deal from the bank in this format, after a privately-placed A$500 million October 2013 trade issued in December last year.

Facing the forthcoming expected conversion date of A$875 million (US$559.2 billion) of hybrids issued by the recently-acquired St.George Bank (St.George) on March 31, Westpac Banking Corporation (AA/Aa1) (Westpac) announced the launch of a new tier 1 (T1) hybrid security on February 20.

New South Wales Treasury Corporation (AAA/Aaa) (TCorp) re-entered the foreign currency funding market on February 18, pricing £250 million (US$356.7 million) of 30-year fixed rate bonds. The issuer also filled a February 20 fixed date tender of a further A$100 million (US$64.2 million) of its 2025 maturity capital-indexed bonds.

On February 18 Suncorp-Metway (A/Aa3) (Suncorp) tapped the £550 million (US$784.5 million) 4 per cent January 2014 government-guaranteed bond it first issued on January 11, bringing the total on issue to £750 million. The increase was led by the same group that brought the inaugural bond – Citigroup, Deutsche Bank and RBC Capital Markets (RBCCM).

Bank of New Zealand (AA/Aa2) (BNZ) priced the first deal from a New Zealand bank to be covered by the domestic sovereign guarantee on wholesale funding on February 18, bringing NZ$180 million (US$91.9 million) of five-year paper at 80 basis points over five-year mid-swap.

Investec Bank (Australia) (Baa1/BBB) (Investec) priced A$200 million (US$127.9 million) of 2014 bonds covered by the Australian government guarantee on February 18, becoming in the process the first triple-B rated issuer to bring a five-year transaction with sovereign backing in the local market.

Appetite for government guaranteed bonds from Australian bank issuers showed no sign of letting up in the past week with domestic and Japanese investor providing the bulk of the US$4.02 billion equivalent raised in total, headlined by benchmark Australian dollar and yen deals from Commonwealth Bank of Australia (AA/Aa1) (CommBank) and ANZ Banking Group (AA/Aa1) (ANZ) respectively.