ANZ Sells Longest-Ever Domestic Covered Bond by an Aussie BankBenjamin Purvis
Australia & New Zealand Banking Group Ltd. sold the longest-tenor covered bonds on record by a domestic lender in Australia.
The Melbourne-based bank priced A$700 million ($638 million) of the 5 percent notes maturing Aug. 16, 2023, to yield 100 basis points more than the swap rate, according to an e-mailed statement from the issuer which self managed the sale. The debentures are expected to have AAA credit ratings.
The transaction follows ANZ’s sale yesterday of A$1.75 billion of four-year non-covered securities, which were priced at 85 basis points above the bank bill swap rate. ANZ’s previous sale of covered securities in Australia was a four-year transaction in March 2012, according to data compiled by Bloomberg.
Covered bonds, which are backed by the borrower and mortgages that stay on its balance sheet, were last issued in Australia by Royal Bank of Canada on July 30, the first issue since a sale by Brisbane-based Suncorp-Metway Ltd. in November.
The notes are a form of issuance that was pioneered in 18th century Prussia. They typically carry top credit ratings and tend to be issued at narrower spreads than debt that isn’t backed by collateral.
Australian banks embarked on their first domestic sales of covered bonds after the government passed legislation in 2011. The longest duration covered bonds sold in Australia by domestic lenders prior to today have been five-year notes, Bloomberg-compiled data show.