New South Wales Offers Biggest-Ever Issue of Floating-Rate Notes

New South Wales is offering at least A$1 billion ($1 billion) of floating-rate notes, its largest issue of such debt, spurred by demand from banks seeking to increase their holdings of liquid assets.

Commonwealth Bank of Australia and Westpac Banking Corp. are managing the sale of securities maturing April 8, 2016, according to a statement from New South Wales Treasury Corp., the funding arm of Australia’s most populous state. The securities are being marketed at 6 to 10 basis points above swap rates, said a person familiar with the matter, asking not to be named as the terms aren’t set.

“This is the first time we have done such a large floating-rate note,” said Tim Hext, head of funding at Sydney-based TCorp. “We expect to see this market develop on strong demand from mostly domestic banks for this sort of product.”

Australian banks boosted their holdings of state government bonds to a record last year to help meet new rules on assets aimed at making lenders more resilient against financial crises. Banks held A$70.7 billion of so-called semi-government notes as of Sept. 30, or 34.7 percent of the debt outstanding, according to data published by the Bureau of Statistics on Dec. 20.

South Australia raised A$2 billion last month selling floating-rate notes that mature in May 2016. Those securities pay 20 basis points above the quarterly bank bill swap rate, according to data compiled by Bloomberg.

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