Oceania

Euro covered bond issuance is ramping up with Westpac Banking Corporation joining Lloyds in the market on Wednesday. Despite a slower book build which drew criticism from rival bankers, Westpac took €1bn with a single digit concession.

Commonwealth Bank of Australia printed the second dollar bond of the week from an Aussie issuer on Thursday. Westpac’s success on Tuesday gave bankers the confidence to progress, but the trade was executed with caution.

Westpac’s $800m three year floating rate covered bond, issued on Tuesday, has piqued interest from other covered bond issuers outside Europe, who could be ready to launch deals at short notice.

The dollar market continued to sustain covered bonds on Wednesday as DNB mandated leads for a five year, a day after ANZ issued $1.25bn in the same tenor. The Australian bank got better execution than would have been achieved in euros and could have priced even tighter. The excellent result is testimony to the issuer’s long absence and to the depth of demand evident across the dollar fixed income market.

Torrid market conditions have kept issuers away from the euro benchmark market since April 29, forcing borrows to consider alternative currencies. On Tuesday, Abbey printed a £500m three year sterling deal, and even though the deal was not subscribed, bankers felt the sterling market was still open. Separately, ANZ has mandated leads for the second dollar benchmark from Australia this year.

Resimac printed a A$375m Australian non-conforming RMBS on Friday, punctuating a A$4bn plus week dominated by prime deals in the Aussie market.

Euro covered bond issuance could be poised to moderate next week, though it is still likely that one or two deals could emerge at short notice. Issuers outside Europe are less inclined to bring euro benchmarks as a change in the basis swap with dollars has reduced the difference in the cost of funding.

The return of two Australian major banks to securitization this week helped put more than A$4bn equivalent of new RMBS and auto ABS bonds on the market.

Commonwealth Bank of Australia (CBA) became the fourth non-Chinese bank to issue a Basel III tier two bond in the offshore renminbi (CNH) market. Although it wasn't able to tighten guidance, the Australian bank took advantage of favourable renminbi-dollar swap rates and managed to save cost.

Australian financial institutions are facing a much brighter future in China, after a free trade agreement opened up the possibility of easier access to the country's banking system. But for now the main opportunities are still going to lie offshore — and, in particular, with the mouth-watering possibilities of the offshore renminbi market. Matthew Thomas reports.

Fitch expects Australian borrowers to reduce their issuance of covered bonds by A$1.5bn to about A$16.5bn (€11.7bn) this year compared to last. Assuming just over half of this is conducted in euros, as was the case in 2014, the agency’s forecast is broadly in line with the average estimated by five covered bond analysts in December.

National Australia Bank issued its first euro benchmark covered bond of the year, and by choosing a maturity that would offer investors a relatively attractive yield, the issuer ensured a strong reception.