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The second Australian corporate deal of 2012 priced on February 1 as Volkswagen Financial Services Australia (VW Australia) (A-/A3) increased its January 2015 domestic line by A$150 million (US$159.5 million). The tap, which had launch volume of A$100 million, is the first increase to a line which was introduced in January last year in a A$150 million transaction.

Fitch Ratings (Fitch) concluded its negative ratings watch on the Australian major banks on February 24, downgrading three of the big four to leave all the majors with equal ratings of AA- stable. The negative watch, which began on January 30, came following a Fitch review of the world's largest banks and the publication of its special report on major banks of Australia and Canada.

Westpac Banking Corporation (Westpac)'s inaugural A$3.1 billion (US$3.3 billion) domestic covered bond transaction was another well-received deal, its issuer and lead managers say. Following on from the success of Australia's first domestic covered bond, the deal points to a continued trend of domestic real money participation in the sector.

The week beginning January 23 saw both the second Australian dollar covered bond transaction and the second domestic corporate issue of the year price. Elsewhere other sectors in both Australia and New Zealand remained quiet.

An International Monetary Fund (IMF) working paper exploring the capital adequacy of Australian banks has acknowledged the strong position of the domestic majors. While the report also suggests Australian banks would be broadly resilient to a shock in the mortgage market larger than they are likely to experience, it also recommends consideration of even higher capital requirements for systemically-important local banks.

Australian Postal Corporation (Australia Post) (AA+) launched and priced its first domestic transaction in almost three years on January 25. The new A$280 million (US$294.6 million) five-year deal was upsized from a launch volume of A$200 million and priced 10 basis points tighter than its indicative margin at 130 basis points over swap.

APA Group (APA) (BBB/Baa2) has become the first Australian energy utility to issue a yen transaction in several years having priced a Y$10 billion (US$123.7 billion), 6.5-year deal on January 24. The proceeds of the 1.226 per cent coupon transaction have been exchanged for A$125.9 million that will be repaid at a 6.8 per cent coupon.

In wake of the first corporate deal of the year, bankers say they believe flow will increase with true corporate borrowers predicted to move away from the loan market and into the capital markets. While corporate demand, both locally and internationally, remains strong, increasing costs of offshore issuance may make also the domestic bond market a more attractive option for borrowers in 2012.

The week beginning January 16 saw the first Australian dollar deals of the year from domestic issuers. The first-ever covered bond from a domestic major bank was issued, and another is soon expected to come to market. The first Australian corporate deal of 2012 was also priced.

Westpac Banking Corporation (Westpac) has issued a A$3.1 billion (US$3.3 billion) Australian dollar covered bond transaction. The transaction is the second domestic deal issued by a major bank, following a A$3.5 billion dual-tranche deal issued by Commonwealth Bank of Australia on January 17.

In the wake of the state of Queensland's mid-year budget update the state's treasurer, Andrew Fraser, tells KangaNews in an exclusive interview that maintaining the fiscal discipline required to regain a triple-A rating remains a policy goal of the government. Measures towards this goal have led to an improved budget and funding position, even as Queensland approaches a state election in 2012.