FRITH A few factors fed into the decision. First, we had observed that conditions in the Australian fixed-income market had been very supportive for issuance. There was strong investor demand and healthy execution conditions at the time, demonstrated by several well-received transactions by peer issuers. This gave us the confidence to move forward.

From a Barclays-specific standpoint, we executed a tier-two deal in Australia last November that was also very well received. Therefore we were confident of good name recognition and support from local investors.

Additionally, we’d just completed some direct investor engagement in the region. I was on the ground in Australia in late March, with a colleague from our investor relations team. The meetings went very well and reinforced the sense that the market was open and receptive to our credit.
When we combine constructive market conditions, recent positive execution experience and fresh investor engagement, the timing felt right to pursue a senior callable transaction – and it paid off.

As for the structure, we opted for the multitranche callable format to offer a range of options to investors and to meet different pockets of demand. The Australian dollar market has shown increasing familiarity and comfort with senior callable structures over the years, so we felt the format would suit us as issuer and the investors alike.

On a strategic level, we also want to diversify our funding base. For our annual issuance volume, we don’t want to rely solely on sterling, US dollars and euros. Tapping into the Australian market helps us broaden our investor outreach, particularly in attracting demand from accounts that may not typically participate in our other currency deals.

FRITH  Tier-two instruments are callable for regulatory reasons. In the final five years of a tier-two instrument's life, bank issuers such us ourselves typically receive amortising credit toward regulatory capital ratios, which gradually declines over that period. The call option is a way of potentially managing this in an efficient manner.

A similar principle applies to TLAC [total loss-absorbing capacity]- or MREL [minimum requirement for own funds and eligible liabilities]-eligible senior instruments like the one we just issued. When a security enters its final year to maturity, it no longer counts toward regulatory requirements. This is why TLAC and MREL securities are typically structured with a one-year call option before maturity.

This callable feature provides the issuer with the flexibility to repay the instrument a year before maturity, aligning with regulatory treatment. This structure is very common across global markets and has also been common in Australia for some time. In fact, we issued in this format in 2021 and other UK issuers – including Lloyds Bank – do the same globally and in Australia.

To clarify, if there are callable features in senior instruments it is usually because they are issued out of a holding company or are senior nonpreferred instruments, designed to meet TLAC or MREL eligibility.

By contrast, senior debt issued from a bank’s operating company purely for general funding purposes doesn’t typically include a call feature, because they are not designed to receive the same regulatory capital treatment. I believe this is well understood by investors in Australia and was evident in the strong demand for our transaction.

KHOR Our last senior Kangaroo issuance was in 2021 and we re-entered the market with a tier-two transaction at the end of last year. The gap between senior deals created a good appetite among investors, which likely contributed to the strong demand this time around. The demand statistics really speak for themselves. They reflect solid support across the five- and 10-year tranches, and across a broad spectrum of Australian and Asian investors.

FRITH The majority of demand focused on the five-year part of the curve – the fixed- and floating-rate tranches. This is why the bulk of the deal was allocated there: A$750 million combined across the 6NC5 fixed and FRN tranches.

We had solid interest in the 11NC10 tranche as well, but ultimately chose to print a smaller amount – A$250 million – because the longer tenor came with a slightly wider spread. It’s certainly beneficial to term out when appropriate but it’s also about balancing pricing, cost of funds and demand.

Overall, the final tranche sizes were very much a reflection of the natural orderbook. There wasn’t a particular strategic aim to skew the allocation; it was a case of responding to where the demand was strongest and making sure the final outcome kept all parties happy.

FRITH I won’t go into the specific numbers but I’ll say the outcome was very competitive. Pricing was broadly in line with our expectations heading into the deal. In fact, the 10-year tranche slightly outperformed – by around 5 basis points more tightening than the five-year – which was a positive outcome. Overall, we had a clear idea of where we expected the transaction to land and we fortunately achieved these levels, if not slightly better on the longer-dated tranche.

From a landed cost of funds perspective, the levels were competitive when compared with our alternatives in global markets. As a frequent issuer, our cost of funds is quite transparent across euros, US dollars and sterling, so investors are able to assess relative value across markets. On this basis, the Australian dollar outcome compared well.

FRITH Our view has shifted positively over time. The Australian dollar market has clearly grown: it is deeper and more competitive than it was just a few years ago and as a result our execution confidence has increased. We expect the Australian dollar market to play a slightly more prominent role in our funding mix going forward. That said, I am not anticipating a dramatic increase in volume. It’s more a case of incremental growth at the margin compared with years ago.

FRITH I wouldn’t want to commit to a specific number. But we have certainly been more active now than we were in the past. For example, our last Australian dollar deal before 2024 was around A$600 million, in 2021. Moving to A$1 billion in each of 2024 and 2025 represents a step up and we are really happy with both transactions.

Whether we continue with similar volume depends on a few factors: investor demand, market conditions, and the competitiveness of Australian dollar funding and how it fits into our overall needs in a given year. It could be slightly more or slightly less from here.

FRITH It’s an interesting question. Investors coming into the transaction were well aware that these bonds aren’t repo-eligible: this status is typically limited to instruments issued by an operating company, and it’s very clear that this wasn’t the case here.

Because of this awareness, I don’t believe the lack of repo-eligibility influenced demand or surprised anyone. I understand investors would have approached the transaction through a relative value lens—comparing our Australian dollar bonds with our issuance in other currencies, adjusting for cross-currency basis.

In theory, perhaps there might be a slight pricing benefit if the bonds were repo-eligible. But this is hypothetical. Given the structure and the clarity on the deal being a global TLAC offering not issued from an operating company, I don’t think it affected the shape of demand. The Australian ISIN and domestic format – from a New South Wales [law] Kangaroo programme – are likely to have been helpful in a technical sense, but this is separate from the repo-eligibility point.