Export Development Canada, the North American nation’s export-financing arm, plans to issue further kangaroo bonds after its first sale today.
EDC is “aiming to become a regular issuer in Australia,” Vice President and Treasurer Brian Laffin said in an e-mailed response to questions. Our “natural funding requirements are in the three- to five-year sector and we would consider either fixed or floating opportunities,” he said.
The lender, based in Ottawa, is joining other AAA rated borrowers including the European Investment Bank and the World Bank in seeking to tap demand for kangaroo notes, or debt sold in Australia in the local currency by offshore entities. Sales of the securities have totaled A$23.7 billion ($21.2 billion) this year, a more than threefold increase on the same period a year earlier, according to data compiled by Bloomberg.
EDC sold A$650 million of five-year kangaroo bonds, pricing the notes to yield 70 basis points more than similar-maturity government debt, according to an e-mailed statement from Commonwealth Bank of Australia, which helped manage the sale.
The borrower monitored the kangaroo bond market for a decade and made its debut after deciding new bank liquidity rules being contemplated in Australia would help create sustainable investor demand for the debt, Laffin said.
Australia’s banking regulator, the Australian Prudential Regulation Authority, said in a paper last year it may allow some securities other than Australian sovereign bonds to qualify as liquid assets because there isn’t enough domestic government debt on issue to satisfy requirements. APRA will give an update on its regulatory plans at a Sept. 6 seminar in Sydney, said spokesman Andrew McCutcheon.
Kangaroo bonds may be a possible source of high quality liquid assets to help lenders meet tougher rules relating to the size and type of buffer they must hold to protect depositors, Kevin Davis, a professor of finance at the University of Melbourne, said in a March 15 report.