Australian bonds in “soft” demand
(3 September 2012 – Australia) National Australia Bank (NAB) has found it extremely hard to sell its Australian bank bonds from its British arm this year.
NAB sold a barely subscribed £250 million ($A383 million) 14-year covered bond issue.
Turmoil in Europe from the end of last year and into this year has meant banks have been slower than usual to secure wholesale money to fund their lending books.
But banks are again thinking about interest in covered bonds to help keep average funding costs low.
The NAB’s bond issue came on the heels of Commonwealth Bank of Australia (CBA) tapping British investors for £750 million.
Covered bonds have traditionally been snapped up by investors, given they are backed by a portfolio of mortgages making them lower risk.
Still, the soft demand for NAB has raised questions as to whether offshore investors are tiring of Australian bank bonds, given nearly A$100 billion worth are sold a year.
NAB chief financial officer Mark Joiner recently told investors the bank had met this year's funding target from global money markets, raising A$27 billion. The bank was now working on raising funds to meet next year's funding needs.
Australian banks generate about 40 percent of their funding from global money markets, making up the shortfall in deposits.
Turmoil in Europe from the end of last year and into this year has meant banks have been slower than usual to secure wholesale money to fund their lending books.
But banks are again thinking about interest in covered bonds to help keep average funding costs low.
The NAB’s bond issue came on the heels of Commonwealth Bank of Australia (CBA) tapping British investors for £750 million.
Covered bonds have traditionally been snapped up by investors, given they are backed by a portfolio of mortgages making them lower risk.
Still, the soft demand for NAB has raised questions as to whether offshore investors are tiring of Australian bank bonds, given nearly A$100 billion worth are sold a year.
NAB chief financial officer Mark Joiner recently told investors the bank had met this year's funding target from global money markets, raising A$27 billion. The bank was now working on raising funds to meet next year's funding needs.
Australian banks generate about 40 percent of their funding from global money markets, making up the shortfall in deposits.
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