Goldman Makes 2014 Aussie Bond Debut as Westpac Plans Issue

Goldman Sachs Group Inc. is poised to become the first U.S. commercial bank to sell bonds in Australia this year, while Westpac Banking Corp. is also planning a new line of notes.

Goldman Sachs is marketing fixed- and floating-rate Australian dollar bonds due August 2019 at a yield of about 135 basis points more than swap rates, according to an e-mailed statement today from the issuer. Sydney-based Westpac, Australia’s second-biggest lender by market value, plans to sell five-year securities at a spread of around 95 basis points, according to a person familiar with the matter who asked not to be identified because the terms aren’t set.

Investor appetite for credit has helped cap borrowing costs in Australia with the yield premium over the swap rate on bank paper averaging 99 basis points yesterday and 94 on Feb. 7, a low unseen since February 2008, according to a Bank of America Merrill Lynch index. No U.S. commercial bank has sold bonds in Australia since Goldman Sachs’s last transaction in July, when it priced A$750 million ($670 million) of five-year fixed and floating-rate notes at a 170-basis-point spread.

“Investment banks were one of the strongest performing sectors in 2013 and I’d expect the Goldman Sachs deal to perform well, although recent emerging-market ructions could damp demand a bit,” said Justin Davey, a money manager at BT Investment Management Ltd.

Rabobank, ABN Amro

Dutch lenders Rabobank Groep and ABN Amro NV are the only other foreign commercial banks to have come to the Australian market so far this year, issuing A$600 million and A$500 million of notes respectively last month.

The August 2018 fixed-rate bond that Goldman Sachs sold last year yielded 106 basis points more than the swap rate today, Australia & New Zealand Banking Group Ltd. prices show. 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.

National Australia Bank Ltd. was the last 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, according to data compiled by Bloomberg. Both Commonwealth Bank of Australia and ANZ priced five-year securities in October. The last new benchmark-sized five-year bond from Westpac was issued in January 2013 at a 95-basis-point premium, the data show.

“There haven’t been many primary bank issues since the latter part of 2013,” BT’s Davey said. “I’d expect there to be solid interest for the Westpac transaction given the lack of supply and the benign conditions for banks as evidenced by recent results announcements from ANZ and CBA.”

Goldman Sachs is managing its own offering along with CBA, NAB and Royal Bank of Canada. Westpac is also managing its own sale, the person familiar with that matter said. Both transactions are expected to price by tomorrow.

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