Currencies

Westpac Banking Corporation priced its first Aussie dollar covered bond on Monday night, following in the wake of Commonwealth Bank of Australia. It mimicked CBA’s choice of tenor and dual fixed rate and floating rate format — but issued slightly less and at a tighter spread.

Lingering concerns about the depth of the 144A market have been allayed after Bank of Nova Scotia’s $2.5bn deal on Friday on the back of more than $5bn orders took this January’s supply beyond last year’s almost record levels.

After a spree of issuance by Australian banks in foreign currencies, Westpac announced plans on Friday to issue its first Australian dollar covered bond, while Bank of New Zealand raised NZ$225m ($180m) through a domestic private placement.

Commonwealth Bank of Australia’s ground-breaking Aussie dollar covered bond deal is the story that everyone was waiting for. Its success disproves the conventional wisdom that euros and dollars are the only really liquid markets.

Year to date covered bond issuance in all currencies has reached €32.3bn, according to Dealogic data. Issuers have launched successful trades in euros, sterling, Norwegian, Danish and Swedish kroner/kronor, Swiss francs and Australia dollars. But US dollar denominated supply, the largest market after euros, has been non-existent.

Terra Boligkreditt successfully raised €500m of five year funding on Wednesday morning, nearly five months after it first mandated for a deal. German and Nordic investors looked past the bond’s Aa2 rating from Moody’s, allowing the issuer to price inside guidance on the back of an oversubscribed book.

Secondary market activity has slowed from the brisk pace in the first two weeks of the year but the market remains well supported, particularly in the short end where offers out to three years have started to disappear. Better buying has also been reported in peripheral credits, leading participants to speculate that primary supply might be forthcoming. With the exception of ANZ’s 10-year, the long end is also performing well.

Some 43% of National Bank of Greece covered bondholders submitted their paper for buyback below par, helping the bank reach a €300m core tier one gain through its liability management exercise.

Commonwealth Bank of Australia opened books on the first Australian dollar transaction from a domestic bank on Monday, while Bank of New Zealand began taking indications of interest for that jurisdiction’s first trade of 2012.

Syndicate bankers had expected Thursday’s ECB meeting to curtail supply, but BPCE has courageously squeezed through the funding window with a competitively priced €850m 10-year tap.

As a result of deal announcements and the new issue premium, secondary market turnover has been hit, with spreads moving on little volume. Curves have conspicuously steepened in France but DexMA remains out of line.

ABN Amro and Credit Suisse maintained primary market momentum on Wednesday, adding another €2.25bn of supply. ABN Amro paid above initial price thoughts to ensure smooth execution of its 10 year, while Credit Suisse was able to price its five year inside UBS’s offering last week — making it the tightest five year euro print of the year.