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The surprise referendum result in the UK has left market participants scrambling to gauge the likely impact on global markets – including in Australasia. Most seem to view Brexit as a "shock not a crisis", assuming isolationist contagion does not spread throughout the Eurozone and beyond.
Deal flow was very slow ahead of the unpredicted - but eventual - vote by the UK to exit the European Union. Following mid-June state budgets, Queensland Treasury Corporation (QTC) and NSW Treasury Corporation (TCorp) are the latest to release funding programme updates. Meanwhile debt reduction remains Western Australia's key focus.
The absence of steady domestic corporate deal flow was an advantage for SGSP Australia Assets (SGSPAA)'s recent transaction. The borrower says lack of competing flow allowed it to make the most of demand in the seven-year part of the curve, adding that investor engagement with the transaction was very positive and demonstrates a level of maturity in the domestic market.
On June 22, Firstmac priced the refinancing of the class A-2B (A) notes of its Mortgage Funding Trust Series 1A-2014 residential mortgage-backed securities issue. The new, Firstmac Mortgage Funding Trust Series 1A-2014 Class A-2R, have volume of A$297.5 million (US$221.9 million) – which will be used to refinance a short-term US dollar tranche issued when the deal was first brought to market in June 2014.
Following mid-June state budgets in Queensland and New South Wales, Queensland Treasury Corporation (QTC) and NSW Treasury Corporation (TCorp) have both released funding programme updates featuring borrowing-requirement projections dominated by refinancing. The states' issuance trajectories are relatively similar at headline level, though TCorp's is set to be altered dramatically by further forthcoming state-asset transactions.
In the wake of the state's May budget, which showed an expected sharp increase in the general government deficit in 2016/17, the treasurer of Western Australia (WA), Mike Nahan, told an investor and dealer panel lunch in Sydney on June 9 that WA remains focused on debt reduction via asset sales.
In the wake of Suncorp-Metway (Suncorp)'s fourth domestic covered bond transaction, the issuer reveals that solid domestic participation replaced a temporarily waning, potentially Brexit-induced, offshore bid. However, the selection of the covered-bond instrument, often viewed as a 'rainy-day' product, was not in response to any implied views around political or socioeconomic event risk.
On June 17, SGSP Australia Assets (SGSPAA) (BBB+/A3) launched and priced a new, seven-year Australian dollar issue. Indicative pricing was in the area of 185 basis points over semi-quarterly swap, the tight end of initial 185-190 basis points over semi-quarterly swap guidance that was revealed ahead of launch on June 16.