No guarantee no obstacle for CBA in US debt market
The four major banks are steadily weaning themselves off government-guaranteed bond issuance. On Thursday, Commonwealth Bank provided a great example of just how far the banks have come in this respect. The bank raised US$4.0 billion in the US s144A market, without a guarantee. This is believed to be the largest issue undertaken by one of the four major banks and it included US$1.5 billion of ten-year bonds. The CBA's ability to achieve this was probably aided by that market's acceptance of non-guaranteed bank issuance. US banks will no longer receive government guarantee support from the end of this month.The issue comprised three tranches: US$0.5 billion of bonds were issued for three years and priced at 140 bps over Treasuries; US$2.0 billion of five-year bonds were issued at 160 bps over Treasuries; and US$1.5 billion of ten-year bonds were issued at 182 bps over. A ten-year issue of senior debt is most unusual, particularly in this volume, and shows that the CBA is making a serious effort to lengthen its debt maturity profile. This is a point that APRA (and RBNZ) has been emphasising to the banks of late.Australia's regional banks and larger ADIs have yet to issue without a government guarantee, at home or abroad, but the time must be fast approaching. Suncorp-Metway has been the most consistent issuer this year, out of this group, and should be readying itself for a non-guaranteed issue. The domestic market would be the best place to launch first. This year has seen the return of true corporate issuance, with the likes of Tabcorp, Leightons, Holcim, Dexus Property Group and others coming to the market. This is a welcome return after no issuance in 2008 and only A$1.2 billion of issuance in 2007, if credit wrapped issues are excluded.The time may now be right for a revival or, dare we say, even for the establishment, of a real corporate bond market.