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Infrastructure measures in Australia's federal budget are weighted on the side of incentivising states to recycle assets, though some new funding has been found. Government rhetoric on fiscal consolidation, meanwhile, has not fed through into radical changes to projected federal government debt in the medium term. Budget surplus is not expected in the four-year forecast period and Commonwealth government securities (CGS) on issue are projected to start falling only in 2020-21.
The sale of Australia's first-ever wholesale sub-investment-grade bond issuance signifies a deepening market for a wider range of credits, says the deal's sole lead manager. Even so, and despite a 30-plus account book for the deal, market participants agree the single transaction is unlikely to yet signify a new trend for speculative-grade domestic corporate issuance.
National Australia Bank (NAB) (AA-/Aa2) priced a new senior-unsecured, five-year Australian dollar benchmark transaction on May 12. The transaction is the borrower's second domestic deal this year and its first in senior-unsecured format.
Qantas Airways (Qantas) launched and priced a new eight-year transaction on May 12, in the first-ever Australian dollar domestic wholesale-market transaction from a sub-investment-grade rated corporate issuer. While there has been more talk in the market around higher-yielding wholesale issuance, KangaNews understands the Qantas transaction was driven by issuer specifics than a broadening of demand more generally.
Toyota Finance Australia (AA-/Aa3) priced a new five-year fixed-rate Australian dollar deal on May 12, in the market's first corporate deal launch for over a month.
Suncorp Group (Suncorp) closed its offer of convertible preference shares (CPS3) on May 8, upsizing the issue to a final A$400 million (US$375.7 million). The issuer confirms the securityholder offer was well oversubscribed and was therefore subject to scaling.
There was only a sprinkling of deal activity in the Australia and New Zealand domestic markets in the first full week of May. Of greater focus was the release of half-year results for National Australia Bank and Westpac Banking Corporation (Westpac), after ANZ Banking Group's were published on May 1. Westpac also launched a new tier-one hybrid issue during the week under review.
The state of Victoria's plans to lease out the Port of Melbourne – with proceeds expected to hit state coffers in the 2015/16 financial year – have reshaped the borrowing plans of Treasury Corporation of Victoria (TCV). With the port lease proceeds slated for use to pay down state debt, TCV expects to conduct a greater-than-usual proportion of its 2014/15 funding task in short-term markets.
On May 8, KfW Bankengruppe (KfW) (AAA/Aaa/AAA) priced a fifth increase to its existing A$1.05 billion (US$982 million) March 2024 Kangaroo issue. According to KangaNews data, the line was introduced in September 2013 at a volume of A$300 million and pricing of 93.5 basis points over Australian government bond (ACGB).
National Australia Bank (NAB) reiterated that its capital position is comfortable at its May 8 half-year results announcement, despite a clutch of recent regulatory moves which add to the capital burden of the bank and its peers. NAB also updated its internal common equity tier-one (CET1) target, setting its goal at 0.75-1.25 per cent above the new regulatory minimum for domestic systemically important (D-SIB) banks.