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A return to the era of government-guaranteed bank funding came closer on October 26, when a European Union (EU) leaders' statement revealed guarantees are an important constituent part of a plan to shore up European banks' medium-term funding. The plan does not currently have significant detail attached, but the EU statement says measures are "urgently needed and are necessary in the context of strengthening prudential control of the EU banking sector".

A new residential mortgage-backed securities (RMBS) deal from Bendigo and Adelaide Bank (BEN) priced on October 28. The transaction was upsized to A$750 million (US$800.3 million) from its indicative volume of A$500 million, and is the issuer's second RMBS transaction of 2011.

National Australia Bank (NAB) gave a strong hint of its expectations for Australia's future liquid assets regime at its annual results presentation on October 27, by excluding its A$21 billion (US$22 billion) of internal residential mortgage-backed securities (RMBS) from its liquid asset holdings. The bank also disclosed a larger and more conservatively constructed liquids book than the most recent previous big four bank to announce results.
On October 26 Woolworths (A-/A3) set the margin for its hybrid securities, called Notes II, at 325 basis points over the bank bill swap rate (BBSW) – at the lower end of the marketed range. Due to strong demand, the company increased the offer to A$700 million (US$733.3 million), from the A$500 million at launch on October 18.
Airservices Australia (AsA) (AAA) priced the first Australian non-financial corporate transaction since early July on October 26, placing A$200 million (US$208 million) in a new five-year bond. The deal, which priced at 110 basis points over swap, attracted what lead manager sources call "encouragingly broad-based demand" from a number of real money investors, which enabled the transaction to be upsized from a A$100 million launch volume.
Against a backdrop of global volatility, RéseauFerré de France (RFF) (AAA/Aaa/AAA) completed its first Australian roadshow – following the formal establishment of a Kangaroo programme – in the week beginning October 17. RFF, the owner and manager of the French national railway network, visited Sydney, Melbourne and Brisbane, having roadshowed in Hong Kong and Singapore during the previous week.
Investor reactions to the new series of Australian bond indices launched by Standard & Poor's (S&P) and the Australian Securities Exchange (ASX) in mid-October are cautiously optimistic. Australian fund managers acknowledge the appeal of multi-dealer pricing points and the value of S&P's global experience, but they also stress the difficulty in switching benchmarks.
Bankwest completed a new residential mortgage-backed securities (RMBS) transaction on October 21 – the bank's first such deal since November last year. The deal, Swan Trust Prime RMBS Series 2011-1, achieved its launch volume of A$500 million (US$510.8 million).
The first Kangaroo transaction in almost two months priced in the week beginning October 17. Another Australian major bank returned to the domestic senior unsecured market and securitisation flow continued with a new transaction. In New Zealand, the third Kauri deal in three weeks was issued.

Moody's Investors Service (Moody's) placed its A2 rating on Bank of Queensland (BOQ) on review for downgrade on October 20, citing the bank's degree of reliance on wholesale funding – especially in short-term markets – as one of two key reasons for the review. BOQ is already rated BBB+ by both the other two main rating agencies.

The Australian Prudential Regulation Authority (APRA) sent a letter to all Australian authorised deposit-taking institutions (ADIs) on October 20, confirming the removal of the regulatory prohibition on their issuance of covered bonds. APRA expects to produce a new prudential standard for covered bonds, but confirms in its letter that issuance will be allowed in advance of that standard being finalised.