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Australia's wholesale tier-one market took another developmental step in mid-May. Participants in the latest wholesale tier-one transaction offer insights around the precise level of institutional-investor take up of the market's two deals to date, and also reveal surprising information about how this cohort of investors can value the franking credit.
On May 20, KfW Bankengruppe (KfW) (AAA/Aaa/AAA) priced a new five-year New Zealand dollar deal in what is the borrower's inaugural Kauri transaction.
Firstmac priced Australia's largest residential mortgage-backed securities (RMBS) transaction from a nonbank lender since the global financial crisis on May 15. The deal lends support to recent market-participants claims to KangaNews, which suggest that RMBS demand is robust despite relatively limited recent supply and the looming prospect of substantial asset divestment by the Australian Office of Financial Management (AOFM).
The most recent issuer to debut in the Kauri market says it was enticed by strong investor demand and favourable pricing levels. Issuance volumes are at record highs and intermediaries expect the growth trend to continue – provided relative yields and the positive New Zealand economic story persist.
On May 15, Bank of Queensland (BOQ) priced a new wholesale-only additional tier-one transaction in the domestic market. BOQ was seeking to raise around A$150 million, the issuer reveals, with the margin determined by a bookbuild process.
Issuance maintained a steady pace in the week under review, with the majority of deals priced in the Australian dollar market. Asciano priced the largest 10-year deal for a corporate borrower since 2007 while in New Zealand L-Bank debuted in Kauri format.
Firstmac priced its first prime residential mortgage-backed securities (RMBS) of 2015. The transaction – Firstmac Mortgage Funding Trust No.4 Series 2015-1 – was upsized from an indicative volume of A$500 million (US$395.6 million) across eight tranches.
Export Development Canada (EDC) (AAA/Aaa) priced an increase to its 2019 Kangaroo bond on May 14, in what is the borrower's first Australian dollar deal of 2015. According to KangaNews data, the line was introduced in May last year at a volume of A$400 million (US$325.8 million) and later increased by A$300 million in November. That deal, which was also the last time the borrower visited the Kangaroo market, had pricing of 53.25 basis points over Australian government bond.
On May 15, L-Bank (AAA/Aaa/AAA) priced a new New Zealand dollar, four-year, fixed-rate transaction in what is the issuer's debut deal in the Kauri market.
A little over two years since the Australian Office of Financial Management (AOFM) ceased investing in residential mortgage-backed securities (RMBS), the government debt management agency announced on May 13 that it would be selling its approximately A$4.6 billion (US$3.7 billion) residual portfolio. Securitisation market participants' response to the news of a substantial forthcoming inflow for the secondary market to absorb contains some surprises.
A new product designed to package seasoned wholesale corporate bonds in a way which makes them accessible to retail investors in both regulatory and volume terms launched on May 14. The company behind the product believes there is an untapped pool of demand – mainly in the term deposit (TD) allocations of self-managed superannuation funds (SMSFs) – which only eschews the corporate bond asset class because of access constraints.
On May 14, BNP Paribas Australian Branch (BNP Paribas Australia) (A+/A1/A+) priced a new benchmark dual-tranche senior-unsecured Australian dollar line. According to KangaNews data, the transaction is the bank's first Australian domestic bond issue since September 2013.