EIKELAND Are we likely to see World Bank issuing in the Australian or New Zealand markets any time soon?

DORE Yes. The Australian and New Zealand markets remain very important for World Bank and, while we have not issued in either this calendar year, World Bank issued similar volume in the fiscal year ending 30 June to the prior fiscal year – about A$2.6 billion (US$1.8 billion) and NZ$1.2 billion (US$758.1 million). Also, in April World Bank executed a significant Australian dollar trade – A$516 million – with a maturity of eight years. It was not in Kangaroo format – it was an EMTN placed with Japanese investors.

Most of the demand for Australian dollars this year has been concentrated in the short end of the curve at a time when World Bank has been focusing on extending the maturity profile of its liability portfolios. The average maturity of World Bank borrowings this fiscal year is the highest it has ever been – about nine years for International Bank for Reconstruction and Development and 13 years for International Development Association [IDA]. 

We are working on the Australia and New Zealand bond documentation for IDA with the hope of bringing it to the Australian and New Zealand markets.

EIKELAND How are Australian and New Zealand markets shaping up as options in International Finance Corporation (IFC)’s new financial year?

BILL Our Australian dollar curve is quite complete but we plan to inject a new line toward the front end of the curve at some stage. In New Zealand, we will look at extending our curve.

We are also conscious of ESG demand growing in both markets. New Zealand Debt Management’s development of a green-bond framework will likely add further New Zealand dollar interest. New Zealand is quite a sustainability-focused economy as it stands, so the addition of sovereign green bonds should provide a platform for other issuers to pursue themed issuance there.

Planning will be difficult, however. SSAs will be competing for the same windows for our deals, which will likely make execution harder. Previously, we could potentially pick a day of the week and get a deal done but these days it is more challenging.

EIKELAND What are Nordic Investment Bank (NIB)’s plans for the medium term in the Kangaroo and Kauri markets? It is worth noting that, at times, NIB has been more active in New Zealand dollars than Australian dollars.

HELLERUP We are very happy to be back in the Kangaroo market, after some years of absence, with our three-year transaction in March. Having recently visited Australia and New Zealand and had conversations with investors, it seems the New Zealand dollar market will likely be more positive for us.

On top of the pullback from Japanese investors, bank balance sheets are not really an investor base for us in Australia because supranationals are not part of the liquidity facility with the central bank.

It is almost the opposite case in New Zealand. Bank treasuries in New Zealand told us they would really like to see NIB back in the Kauri market as it is one of the rare opportunities to get exposure to the Nordic region. As these banks are not buying our paper anywhere else, we do not mind paying up a little for diversification. When it comes to tenor, 3-5 years suits them as well as NIB.

EIKELAND If bank treasuries are a bedrock of the New Zealand dollar market, does this actually make Kauri issuance a more reliable source of funding for SSA issuers?

RUSCHPLER There has been a domestic bid in the Kauri market for quite some time. The bank treasury bid is significant and when there is a lack of supply cash builds up. Issuers can leverage this pent-up interest for successful transactions. On duration, investors prefer five-year tenor.

What is lacking is offshore interest, which is something we experienced in our Kauri transactions this year. It is quite surprising, considering where rates are in New Zealand. Perhaps the domestic bid means the Kauri market is reliable compared with others, but it is a shame not to get more offshore demand.

Conversely, we saw a lot of offshore interest in our Australian dollar three-year transaction, which was predominantly geared toward those investors. Domestic investor interest was perhaps thinner than usual.

Both markets have varying investor bases, with the Australian dollar market providing a little more diversity. Nonetheless, we continue to find opportunities to complete good transactions in both markets. We have found that being nimble and adaptive to market conditions has been quite helpful in executing the programme in both market.