NAB Sells Its First Australian Covered Bond Since Change to Laws
National Australia Bank Ltd. (NAB) raised A$750 million ($671 million) with its first domestic covered bond sale since a 2011 law change allowing Australian lenders to sell the collateral-supported securities.
The 10-year notes were priced to yield 80 basis points more than the swap rate, according to a statement from the Melbourne-based issuer. While NAB and its international subsidiaries have previously sold the equivalent of $28.5 billion of the notes in other currencies including euros and British pounds, this is the first Australian dollar deal it has done since its Auckland-based unit Bank of New Zealand priced A$700 million of notes in June 2011, according to data compiled by Bloomberg.
Covered bonds are backed by assets, typically mortgages, that remain on the issuer’s balance sheet and they generally carry top credit ratings. Westpac Banking Corp. was the previous Australian bank to sell the bonds at home, issuing A$1.125 billion of 10-year notes in November at an 85-basis-point spread, the data show.
A total of A$14.9 billion of covered notes have been priced locally by Australian banks since an October 2011 legislative change enabling them to sell the instruments. In addition to NAB and Westpac, the other domestic issuers to have come to market are Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd. and Suncorp Group Ltd.
Global sales of covered bonds by Australian banks fell last year amid a revival in issuance of residential mortgage-backed securities, which also draw on home loans for collateral.
RMBS sales in Australia almost doubled in 2013 to A$26.1 billion and the government pulled back its support program for the notes as record-low central bank interest rates spurred the highest-ever home prices and an acceleration of housing credit growth.
AMP Bank Ltd. is currently offering a new A$500 million mortgage bond, marketing the top class notes at a yield of 95 basis points more than the bank-bill swap rate, according to a person familiar with the matter who asked not to be identified because the terms aren’t set. Macquarie Group Ltd., Commonwealth Bank of Australia and Bendigo & Adelaide Bank Ltd. have also sold RMBS this year.
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