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Westpac Institutional Bank (Westpac)’s strategic decision to separate its rates and credit operations has led to a number of changes in its credit trading business in Australia, New Zealand and the UK, including a brace of new hires.

The Australian government guarantee scheme came into effect on November 28 2008. Australian banks started issuing with government guarantees onDecember 8 2008.
 
By the end of the scheme on March 31 2010 the amount of long-term debt issued by Australian banks under the guarantee scheme amounts to the equivalent of over US$130 billion at current exchange rates.
 
The main currency of issuance has been USD, with over US$61.9 billion issued. This is followed by AUD, with A$56 billion issued - predominantly in the domestic Australian market. The third-biggest issuance currency is Yen, with US$14.1 billion equivalent issued in the euro-yen and Samurai bond markets.
 
Below is the final tally of government-guaranteed deals from Australian banks, gleaned from KangaNews contacts as well as the Australian government's website on guaranteed liabilities.

 

ANZ Banking Group (ANZ) closed a busy week for Australia's biggest bank borrowers with a A$3.25 billion (US$2.3 billion) domestic transaction on January 9. With both National Australia Bank (NAB) and Commonwealth Bank of Australia (CommBank) issuing large US dollar transactions in the same week, Westpac Banking Corporation (Westpac) is now the only big four Australian bank not to have issued both on- and offshore under government guarantee.

Royal Bank of Scotland Australia Branch (AA-/Aa1/AA-) (RBS) became the first issuer with a non-Australian parent to bring a bond transaction covered by the Australian government guarantee with one of the three tranches it priced on December 19.

Two of New Zealand’s local councils, Dunedin City Treasury (AA-) (Dunedin) and Greater Wellington Regional Council (AA-) (Wellington), have priced transactions off wholesale documentation, but retail demand continues to be the main driver of corporate deals in New Zealand with Fonterra (A+/AA-) the latest to announce a deal aimed at that buyer base.

After a hectic week as Australian bank issuers rushed to take advantage of the government guarantee for their bonds before the end of 2008, market participants say the window for further deals this year is rapidly closing with little prospect of deals after December 17 and a strong likelihood that any remaining activity will be in the form of taps to recent guaranteed deals.

New South Wales Treasury Corporation (TCorp) announced a buyback offer for up to A$35 million (US$23.41 million) of its capital-indexed bonds (CIBs) on December 16 as a routine means of facilitating liquidity in the securities, but the offer did not find any sellers and closed without activity.

The UK Treasury announced on December 15 that it is extending the range of currencies covered by its credit guarantee scheme to include the Aussie dollar, but sources at British and international banks say likely pricing levels predicate against guaranteed deals – either in Kangaroo format or through local branches – from UK issuers in Australia.

This week US$7.3 billion equivalent of government-guaranteed debt has been issued by five Australian banks with the only remaining member of the big four – National Australia Bank (NAB) – also launching a domestic transaction on December 12 with pricing to follow later in the day.
 

UBS, provider of the most commonly-used benchmark indices in Australian debt markets, confirmed on December 11 that government guaranteed Australian dollar bonds will be placed in the supranational and sovereign section of its non-government index – placing them in the same category as supranational, sovereign and agency (SSA) Kangaroos.

A clutch of asset-backed security (ABS) deals in the last weeks of the year is being taken by market participants as a positive sign for a gradual return to health in 2009, but sources connected to the recent deals from Challenger Financial Services (Challenger), Resimac and Macquarie Leasing counsel against over-optimism.