Maturities prompt rush of issuance

While NAB is unlikely to have pushed the cost of offshore borrowing higher for all the banks, it has pushed its own cost of debt higher. The cost of a negative outlook on its 'AA' credit rating from Standard & Poor's appears to be at least 2 bps for two-year funds in the domestic market.

ANZ raised $120 million of two-year funds at 63 bps over swap last week, topping-up to their September 2010 line and taking outstandings to $430 million. NAB privately placed two-year debt at 65 bps over, the week before.

ANZ also issued a further $1.05 billion of bonds in two tranches, adding to existing November 2011 fixed and floating rate lines. Priced at 90 bps over bank bills/swap, the ANZ added $350 million to its fixed rate bonds to take outstandings to $950 million, and $700 million to its FRNs to take outstandings to $1.45 billion.

Westpac and the Australian branch of Bank of Scotland followed ANZ's lead. Westpac added $336 million to its September 2012 FRNs, increasing the line to $938 million, and $264 million to its fixed rate bonds of the same maturity, increasing the line to $1.114 billion. The increases were priced at 100 bps over bank bills/swap.
 
Bank of Scotland demonstrated that the cost of debt for some international banks, even those with the same credit ratings as the Australian banks, has moved considerably wider. BoS issued $200 million of fixed rate bonds and $325 million of FRNs, with an August 2010 maturity, at 115bps over bank bills/swap.

But while all this was happening the CBA quietly placed $100 million for four years, at a very fine 42 bps over bank bills. Clearly, the cost of debt is not hurting the CBA as much as the others.

Issuance for the month of August now stands at more than $3.2 billion and can be expected to increase further. While there is $6 billion of corporate bonds maturing this month, there is a further $4 billion maturing in September.

Activity was much more subdued last week in the RMBS sector. Building society, Wide Bay Australia, became the first non-bank to create RMBS eligible for repo transactions with the RBA. WB Trust 2008-1 issued $103.7 million of prime RMBS, of which $85.7 million are 'AAA' rated Class A securities.

The Bank of Adelaide also announced the establishment of a new warehouse facility, TORRENS Series 2008-2 (W) Trust. Initial issuance of RMBS held within the facility comprises $93 million of Class A, 'AAA/Aaa' rated notes, $6.2 million of Class AB, 'AAA/Aa1 on review for downgrade' rated notes and $2.7 million of Class B, 'AA-/Aa3 on review for downgrade'  rated notes. The tranching structure allows the Class A notes to be fully independent of LMI ratings. The ratings on the lower tranches assigned by Moody's reflect the review for possible downgrade of the ratings assigned to PMI Mortgage Insurance. The warehouse facility is revolving.