Australia Covered Bond Sales May Reach $20 Billion in First Year

Australian banks may sell as much as A$20 billion ($20.1 billion) of covered bonds next year, according to Paul White, global head of debt syndicate at Australia & New Zealand Banking Group Ltd. (ANZ)

Offerings denominated in U.S. dollars may account for up to half of the issuance, White told Bloomberg News at the Australia and New Zealand Debt Capital Markets Investor Forum organized by Euromoney Conferences in New York.

Treasurer Wayne Swan introduced legislation in parliament on Sept. 15 to allow Australian banks and authorized deposit- taking institutions to sell the debt for the first time. The measure will likely be approved before the end of this year, White said. Covered bonds, which typically have the highest credit rating, are backed by assets that stay on the bank’s balance sheet and can be sold in a default.

“We would expect covered bond issuance from the major banks and ADIs, and the U.S. dollar market will be an attractive offshore currency for issuance with about 50 percent of the total achievable,” White said.

The legislation authorizing Australian lenders to issue covered bonds may lead to A$130 billion of sales “in coming years,” Swan said in a speech to parliament upon introducing the measure, according to a transcript.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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