insto - Australian financial markets

This week we saw three Aussie issuers going into Japanese and European markets; the second RMBS deal and the largest Kangaroo transaction (by World Bank) so far in 2010. In New Zealand, the World Bank also executed the largest Kauri bond on issue.

Domestic Market
BoQ launched an A$500 million RMBS transaction maturing on 7 May 2040, Series 2010-1 REDS, which will be priced mid-to-early this week against 1 month BBSW. This is the second mortgage-backed offer this year, following AMP Bank’s $1 billion RMBS issue in January.

The good news and the bad news
In overnight trading, investors welcomed comments from Federal Reserve Chairman Ben Bernanke that interest rates will stay at low levels, but equally were concerned over the weakness in the US economy that has caused the Fed to keep those rates so low.

Bernanke said the central bank will raise interest rates to keep inflation under control when the time comes, though that time could be far away. He also said the economy is growing but has a way to go.

The Dow Jones managed to just keep in the black for the day, up 3 points to 10,390. The S&P500 slipped almost 3 points to 1,103, hurt by a decline in the financial sector, while the Nasdaq dropped 5 pts to 2190.

The issue Yield wil equal the sum of:

The issue margin plus the rate p.a. (expressed on a percentage yield basis) which is determined by the issuer and lead managers to be the mid market rate for an interest rate swap from the issue rate to the maturity rate.

Global response, local reaction

In early July, Insto magazine and Mallesons hosted a roundtable on future financial markets regulation, with participation from a wide-cross section of the industry.

National Australia Bank’s five year guaranteed bond issue was one of few bond issues on a quiet day for new issuance. The US$2.75b bond deal, maturing 8 July 2014, was split into US$1b of fixed rate bonds (50bps+midswaps) and US$1.75b of floating rate notes (50bps+3m Libor).

Overnight the Commonwealth Bank of Australia priced US$2 billion in government guaranteed debt. The deal was split into two tranches: US$1b fixed rate notes and US$1b floating, very tightly priced at 38 basis points over US Libor.

CBA's head of group funding, John te Wechel, said the deal attracted a very wide subscription from the US, Europe and Asia.

The joint lead managers were CBA, Credit Suisse and HSBC.

Watercare Services has issued NZ$200 million of unsecured, unsubordinated wholesale bonds.

The three tranche bond issue is one of the largest NZ domestic corporate wholesale bond offers in recent times.

The issuer had launched a $150 million five year issue with the ability to accept oversubscriptions for a further $50 million.

Australia and New Zealand Banking Group today priced a JPY150 billion Australian Government guaranteed Samurai bond which included two tranches.

The fixed rate JPY100 billion five year 1.65 per cent tranche, priced at 68 basis points over Yen swap. It was at the tight end of guidance which was 68/73 basis points over swap.

The floating rate JPY50 billion five year tranche priced at 68 basis points over Yen Libor. It was at the tight end of guidance which was 68/73 basis points over Yen Libor.

Westpac Banking Corporation has priced a JPY201.3 billion Samurai bond and a JPY44 billion Euroyen bond, which were both Government guaranteed.

The Samurai included two fixed rate tranches and one floating rate tranche.

The JPY11.8 billion, 3 February 2012 fixed rate bond line, priced at 100 with a margin of 40 basis points over swap and a coupon of 1.27 per cent.

The JPY133 billion, 3 February 2014 fixed rate bond line, priced at 100 with a margin of 70 basis points over swap and a coupon of 1.70 per cent.