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There has been an early positive response to the Treasurer of the Commonwealth of Australia Wayne Swan’s May 20 announcement that the government will increase debt issuance, the Australian Office of Financial Management (AOFM)’s investment mandate will be expanded and that semi-government bond issuance will be exempt from interest withholding tax.

European Investment Bank (AAA/Aaa/AAA) (EIB)’s 2013 Kangaroo bond is the first from a triple-A rated issuer to reach A$2 billion (US$1.92 billion) in size following the May 20 increase of A$500 million to the line.

The August 2011 Kangaroo bond first brought to market by KfW Bankengruppe (AAA/Aaa/AAA) (KfW) in February this year has reached a total size of A$1 billion (US$937.4 million) following a tap of A$400 million on May 14.

The Kauri markets two largest supranational issuers have reacted positively to Reserve Bank of New Zealand (RBNZ)'s May 7 announcement that it is to abandon limits on the amount of paper from SSA Kauri bond issuers it will accept for repo purposes.

Instituto de Crédito Official (AAA/Aaa/AAA) (ICO) launched and priced a A$200 million (US$187.52 million) increase to its 2012 Kangaroo bond on May 12, bringing the total outstanding in this line to A$1.2 billion.

On May 9, the same day the agency debuted in the Kauri market, EUROFIMA (AAA/Aaa) increased its 2010 Kangaroo bond by A$150 million (US$141.15 million). The deal, which priced at 81 basis points over the benchmark 2010 ACGB, brings the total size of EUROFIMA’s 2010 line to A$850 million.

Inter-American Development Bank (AAA/Aaa) (IADB) priced an A$150 million (US$142.08 million) increase to its 2010 Kangaroo bond on May 7 – the first Kangaroo transaction since a European Investment Bank tap on April 18.

The creators of two new New Zealand indices, which for the first time track the new wave of triple-A rated Kauri issuance in the country, are hopeful that the indices' adoption by local fund managers will help sustain demand for SSA bonds.

Suncorp Metway Ltd. priced on 1 May 2008 two lines maturing in May 2009.
An April 29 announcement from Australian Prudential Regulation Authority (APRA) has killed off hopes that Australian financial institutions will be allowed to issue covered bonds in the near future – and may mean the products remain no more than a minor source of Kangaroo issuance.

After pricing a A$500 million (US$473.9 million) increase to its 2012 Kangaroo bond on April 18, European Investment Bank (AAA/Aaa/AAA) has acknowledged that the basis swap volatility which first entered the market just before Easter continues to be a barrier to deal making.

Reserve Bank of New Zealand (RBNZ) is reviewing the limits SSA issuers are given for repo purposes as agencies in particular reach or approach their maximum Kauri volumes. And with RBNZ hoping to complete its review by mid-year market sources say there are more agency borrowers ready to issue Kauris if a favourable decision is made.