Goldman Joins Westpac With Biggest Australian Bonds in Two Years

Goldman Sachs Group Inc. (GS) and Westpac (WBC) Banking Corp. sold their largest Australian dollar-denominated bonds in more than two years today.

Goldman Sachs, the first U.S. commercial bank to come to the Australian market since July, issued A$950 million ($855 million) of notes maturing in August 2019 to yield 130 basis points more than swap rates, a person familiar with the matter said, asking not to be identified because the terms are private. Westpac, the third-biggest issuer of bank debt in Australia last year, priced A$3 billion of five-year securities at a 94-basis-point spread, according to an e-mailed statement.

Investor appetite for credit has helped cap borrowing costs in the South Pacific nation with the average yield premium on bank paper over the swap rate at 98 basis points yesterday and 94 on Feb. 7, a low unseen since February 2008, according to a Bank of America Merrill Lynch index. Today’s unsecured bond sales, the largest in Australia this year, were also accompanied by a A$2.5 billion securitized issue from Commonwealth Bank of Australia.

“More than A$6 billion of issuance on one day is massive for the Australian market,” said Ken Hanton, a director in National Australia Bank Ltd.’s debt markets group. “The level of demand we have seen is a clear demonstration of the health of the market at the moment.”

The Goldman transaction was split into a A$700 million fixed-rate portion and a A$250 million floating-rate component, the person familiar said. No U.S. commercial bank has sold bonds in Australia since Goldman’s last deal in July, when it priced A$750 million of five-year fixed and floating-rate notes at a 170-basis-point spread, data compiled by Bloomberg show.

Goldman Offerings

The New York-based company raised A$600 million in November 2012 and A$1.25 billion in May 2011, its first Australian offering following a five-year hiatus. The American bank carries a credit rating of A- at Standard & Poor’s, the seventh highest, and is ranked Baa1 at Moody’s Investors Service, one level lower.

Westpac’s sale was also a two-part deal, comprising A$1.1 billion of fixed-rate notes and A$1.9 billion of floaters. The last transaction from the Sydney-based lender larger than that was in January 2012, when Westpac borrowed A$3.1 billion via its debut domestic covered bond, according to data compiled by Bloomberg. It’s rated higher than Goldman Sachs, with scores of Aa2 at Moody’s and AA- at S&P.

Domestic Sales

NAB was the most recent of the so-called four-pillar domestic banks to sell new five-year notes in its home market, pricing A$1.5 billion of floating-rate debentures in November at a spread of 88 basis points, the data show. The last new benchmark-sized five-year bond from Westpac was issued in January 2013 at a 95-basis-point premium, the data show.

CBA (CBA), the nation’s biggest lender, also priced A$2.5 billion of residential mortgage-backed securities today. It sold A$1.4 billion of class A1 floating-rate notes at a yield 80 basis points above the bank-bill swap rate, A$610 million A2 class floating-rate notes at a 90-basis-point spread and A$300 million A3 class fixed-rated securities at a 110 basis-point spread, a person familiar with the matter said. Pricing on a further A$201 million of notes wasn’t disclosed.

To contact the reporter on this story: Benjamin Purvis in Sydney at bpurvis@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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