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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. 

Intermediaries acknowledge that the window for hybrid deals in Australia has in all likelihood closed for the year with several potential deals not now expected to come to market, but hope remains that 2009 will offer opportunities for both on- and offshore issuers in the tier one (T1) space.

The likely treatment of the Australian government’s guarantee on term debt by rating agencies remains unclear even as the November 28 introduction of the final version of the scheme looms. Standard & Poor’s (S&P) confirms it is yet to make its final decision on whether guaranteed bank debt will receive a triple-A rating despite speculation that it was ready to make the commitment.

The small size of the first debt deal in New Zealand to be included in the country’s government guarantee scheme at pricing has been taken as an indication that local retail investors are sufficiently comfortable with the banking system that they prefer unguaranteed longer-term debt to the two-year maximum tenor paper covered by the scheme.

Rating agencies say there is still insufficient information to determine whether debt issued with an Australian government guarantee will receive rating equality with the sovereign. The issue has come into focus since Standard & Poor’s (S&P) said debt from US issuers under that country’s guarantee will not be rated triple-A.

Despite the revision of its overall funding programme as a result of the November 11 New South Wales (NSW) mini budget, NSW Treasury Corporation (TCorp) has an unchanged commitment to sourcing inflation-linked funding and has confirmed it will go ahead with the next fixed tender for this scheme on November 20.

The first two transactions brought to market on the back of the Australian Office of Financial Management (AOFM)'s commitment to an A$8 billion (US$3.89 billion) injection into the Australian RMBS sector saw some interest from fund managers, with around A$200 million of the total A$1.2 billion priced being sold to non-AOFM investors.

The aggregate value of mortgage pools internally securitised in 2008 by Australian banks to create repo-eligible assets has passed the A$100 billion (US$66.4 billion) mark, while the size of Reserve Bank of Australia (RBA)’s repo book has more than doubled since the credit crisis began to over A$60 billion.

The 2013 domestic transaction which Westpac New Zealand (AA/Aa2) (Westpac) postponed in mid-September reopened on November 12, although a retail brokerage premium added to the latest incarnation of the deal means the issuer will pay a higher price for its debt.