These three agency issuers had completed a total of one Kangaroo deal of A$500 million (US$391.2 million) between them by the end of 2021. They added another one apiece in the space of a single week at the start of 2022.

In at least one case the deal could have been even bigger. KBN’s Oslo-based senior vice president, international funding, Evan Morgan, reveals the issuer capped its deal because it was also active in the US dollar market at the same time as its Kangaroo issuance. Instead, the excess volume allowed it to tighten pricing.

Some market participants believe this clutch of deals could be a sign of things to come. “The flow we saw at the start of the year may have started to shift the mindset to thinking A$500 million is the base case for a new Kangaroo line, where it would have been more like A$300 million before,” argues Daniel Wilson, vice president, DCM Asia Pacific at RBC Capital Markets.

Outright demand was vital, of course. But there should always be demand at the right price. The real key to these volume outcomes was likely basis-swap stability, which allowed momentum to build in the bookbuild process.

“Names like L-Bank have benefited from generally higher demand but their success is also a virtuous circle,” explains Tim Pinchen, vice president, syndicate at J.P. Morgan in Sydney. “We often receive feedback from investors that they prefer larger, more liquid lines, so when an issuer is able to indicate a larger benchmark size for a deal it can attract more bids. Investors respond positively when they know a size like A$500 million is on the table.”

If the basis swap exhibits extended periods of stability it could be a game-changer for smaller supranational, sovereign and agency issuers that have in recent years depended on a succession of smaller transactions for their Kangaroo volume. BNG Bank, for instance, issued no fewer than 133 Kangaroo deals between the start of 2015 and its latest benchmark – just 10 of them for more than A$100 million.

While larger prints may be available on occasion, intermediaries say they are likely to remain the exception rather than the rule. Pinchen tells KangaNews: “It is too early to say that the market is developing a larger minimum size for new lines. The largest SSA prints typically happen early in the year as this is when investors typically have the most cash to put to work. There is also merit in issuers being open to doing smaller-sized or tap deals when they are available.”

Yuriy Popovych, director, fixed income syndicate at TD Securities, adds: “We certainly should not expect the norm for new lines to continue growing toward A$1 billion. Traditionally, A$300-500 million has represented good transaction size for most borrowers and it is fair to expect the market to spend a little time getting used to the idea of it being the norm. There is no reason why issuers should not be well received, though – especially if they are able to offer some extra spread.”