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The UK Treasury announced on December 15 that it is extending the range of currencies covered by its credit guarantee scheme to include the Aussie dollar, but sources at British and international banks say likely pricing levels predicate against guaranteed deals – either in Kangaroo format or through local branches – from UK issuers in Australia.

This week US$7.3 billion equivalent of government-guaranteed debt has been issued by five Australian banks with the only remaining member of the big four – National Australia Bank (NAB) – also launching a domestic transaction on December 12 with pricing to follow later in the day.
UBS, provider of the most commonly-used benchmark indices in Australian debt markets, confirmed on December 11 that government guaranteed Australian dollar bonds will be placed in the supranational and sovereign section of its non-government index – placing them in the same category as supranational, sovereign and agency (SSA) Kangaroos.

A clutch of asset-backed security (ABS) deals in the last weeks of the year is being taken by market participants as a positive sign for a gradual return to health in 2009, but sources connected to the recent deals from Challenger Financial Services (Challenger), Resimac and Macquarie Leasing counsel against over-optimism.

The government guaranteed 2013 maturity tranches of the deal priced by Commonwealth Bank of Australia (AA/Aa1) (CommBank) on December 10 were upsized to an unprecendented combined A$2.2 billion (US$1.45 billion) while the unguaranteed 2011 line the issuer brought at the same time achieved its A$500 million target.

Commonwealth Bank of Australia (AA/Aa1) (CommBank) launched the first bond covered by the Australian government guarantee on December 9 as a domestic transaction, surprising observers who had expected the first test of market response to the guarantee to come in a major offshore jurisdiction.

The anticipated process of reorganisation following the credit downturn has started at a number of banks' Australian businesses, with J.P. Morgan and Citigroup among the institutions to cut back on Sydney-based secondary credit market activities in favour of centralised Asian operations.

Retail demand in New Zealand appears to be holding up in the last few weeks of the year with a clutch of corporate and finance company transactions – the majority not benefiting from the government’s guarantee on retail funding – which could raise up to NZ$825 million (US$437 million).

The Tax Laws Amendment (2008 Measures No 5) Bill which will exempt overseas investors from interest withholding tax (IWT) on Australian state and territory debt was passed by the Senate on December 1 and is now expected to become law, following the formality of royal assent, in the week beginning December 15.

Moody’s Investors Service (Moody’s) and Standard & Poor’s (S&P) have both confirmed they will assign a triple-A rating to issuance covered by the Australian government guarantee, paving the way to an anticipated return to the international markets of one or more Australian bank issuers in the coming days.

Last week a number of intermediaries caused a firestorm in Europe when they tried to unilaterally increase fees for supranational, sovereign and agency (SSA) issuers, based on changing business conditions for lead managers and new fees being paid by government-guaranteed banks which have entered the triple-A space.