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New Zealand's newest large-scale borrower, the Local Government Funding Agency (LGFA), was incorporated on December 7 after receiving its first confirmed ratings. The agency, which hopes to offer cost-effective debt funding to local councils across New Zealand, plans to commence bond issuance via a fortnightly tender process from February 2012.

Standard & Poor's (S&P) released another wave of ratings revisions on December 7 following the publication of its new criteria for banks, with the latest round affecting two Australian institutions. Bank of Queensland has been downgraded by one notch to BBB with a stable outlook while Bendigo and Adelaide Bank was upgraded one notch to A- stable.

Standard & Poor's (S&P) has revealed the impact of its new bank rating criteria on the largest Australian banks, with the outcome for the big four matching most analysts' base case scenario: a one notch downgrade to AA- from AA, but with a stable outlook on the new rating. The big loser in the announcement is Macquarie Group, which is downgraded to BBB from A-, although its subsidiary Macquarie Bank retains its A stable rating.

Lloyds TSB Bank (Lloyds) has opened an exchange offer for the A$600 million (US$604.5 million) of outstanding lower tier two notes originally issued in 2007 by HBOS, as part of a attempt to roll all its tier two capital securities with 2012 call dates. While the bank has not ruled out a call on any notes that are not exchanged it also suggests that a 2012 call is unlikely.

Australian Rail Track Corporation (ARTC) (Aa2) launched and priced a new domestic deal on December 1, taking its target volume of A$200 million (US$205 million). The floating rate three-year deal was oversubscribed and priced in line with indicative pricing of 130 basis points over the bank bill swap rate.

The 37 international banks which had their Standard & Poor's (S&P) ratings revised on November 29 – predominantly for the worse – in line with the agency's new criteria have more than A$70 billion (US$70.2 billion) on issue in Kangaroo and domestic Australian format according to KangaNews data. They also have more than NZ$2.5 billion (US$1.9 billion) outstanding Kauri and New Zealand domestic bonds.

European agency borrowers are emphasising the differences between their support mechanisms and that of Eksportfinans, following the Norwegian export finance agency's downgrade to sub-investment grade status by Moody's Investors Service (Moody's). It has been suggested that the Eksportfinans move could call implicit sovereign guarantees into question in the minds of investors.

The week beginning November 28 saw just one public primary transaction price in the Australian market, although an exchange offer of tier two paper was opened on December 2. Across the Tasman, no new deals emerged this week.

Concerns about a renewed funding squeeze in global commercial paper (CP) markets do not appear to be hurting the Australian majors at this stage. While funding sources emphasise the volatility of the international environment they also say that, so far, short-term pricing and capacity has held up as the Australian banking sector has been a beneficiary of investors' reallocation away from European names.

As a result of amplified volatility, the week beginning November 21 saw very little public primary market activity in both Australia and New Zealand. Just one residential mortgage-backed securities deal priced as market participants nervously await greater stability.

The reorganisation of Commonwealth Bank of Australia (CommBank)'s debt operations appears to be ongoing, with the bank refusing to disclose full details of the changes before internal discussions have been completed. The key feature of the reorganisation for CommBank's debt business is the alignment of DCM origination with other debt origination as part of the bank's corporate finance business, thus separating origination from DCM syndication and sales – which join fixed income trading under the markets banner.

Discussion on the second day of the Australian Securitisation Forum (ASF)'s annual conference focused on the investor universe on- and offshore in an environment of seemingly never-ending market dysfunction. Borrowers say flexibility of funding options, in a world where disparate investor bases are offering unpredictable price points and unreliable execution capacity, will be key.