insto - Australian financial markets

NAB A$1bn increase to April 2013 fixed/floating

Friday

The Bond markets are off to a bumper start

Australia’s debt capital markets have continued the momentum of 2009 on into the early part of 2010, with several new themes.

While the expiry of the Federal Government’s Guarantee saw a flurry of last-minute activity, that story was overtaken by the strength of the Kangaroo market and a strong return by Australian corporates to the bond markets as they sought funding diversification.

It was a moderately busy week despite the Easter break, the RBA lifted the cash rate by 25 basis points to 4.25pct, making it the fifth increase in the past six meetings. Activity in the Australian market picked up towards the end of the week, including domestic issuances from Westpac and BOS, while CBA attracted investors offshore. The market also returned to the subordinated tranches with CNH participating in the securitisation market.

*Domestic Issuance*

Although Macquarie ranked No.4 on Insto’s public domestic ABS league table, following Westpac, NAB and Deutsche Bank, the group won the category by arranging or leading the most non-AOFM supported public securitisation issues in 2009- 4 out of the total 8 deals.

This highlighted Macquarie’s depth of investor reach notwithstanding turbulent market conditions.

The week started from two significant euro bonds from Telstra and CBA, and ended with four new ABS transactions from Bankwest, BEN, Colonial, and Macquarie. NZ’s Southland Building Society also added two new RMBS tranches.

Redbank Project’s debt rating was lowered to CCC- from CCC+ by Standard & Poor's on Thursday. The power plant has encountered operating difficulties since October 2009, and it is uncertain whether planned capital works are adequate enough to stabilise operations.

The CCC- rating also applies to the A$170 million senior secured bonds issued by RB Pass Through, a securitisation vehicle for part of Redbank’s project debt.

Bendigo and Adelaide Bank launched its latest AUD RMBS, TORRENS Series 2010-1 Trust, on Wednesday. The deal is expected to have a volume of $650 million.

The transaction will be structured in three tranches and backed by Australian prime residential mortgages originated by Bendigo Bank.

The Class A Notes will be listed with the ASX.

Details are:
• Class A, AAA/Aaa, $601m, WAL 2.8yrs, Credit Enhancement 7.5pct
• Class AB, AAA/-, $39M, WAL 4.9yrs, Credit Enhancement 1.5pct
• Class B, AA-/-, $10m, WAL 4.9yrs

Legal Final Maturity: May 2042
Joint leads: Deutsche Bank, Westpac

AOFM advised five smaller lenders, including three non-bank lenders that it will invest up to $3.4 billion in total in a series of separate RMBS issuances by them on Thursday. This is part of the Government’s second $8bn RMBS investment.

“Each of these smaller lenders will have AOFM support for RMBS issuances until up to 15 December this year... This will place more competition on the big banks, helping to put downward pressure on mortgage rates over time,” said Treasurer Wayne Swan.