UK Not Keen on NAB Bond?

Industry analysts are concerned whether the global debt market is not as interested with Australian bank bonds. The sentiment came following National Australia Bank’s stumble on its bond.

NAB was only able to sell little of its 250 million pounds ($383 million) 14-year covered bond issue. Investors usually snap up covered bonds especially if these are backed up by a portfolio of mortgages because it provides them lower risks.

The Commonwealth Bank, meanwhile, also tried to tap British investors for about 750 million pounds.

The little demand for NAB’s covered bonds has raised question on whether British investors’ interest on offshore investments is waning. Australian bank bonds average about $100 billion annually.

According to Paul Fenner-Leitao, British investors are becoming more cautious when it comes to Australian bank bonds. Although these are diversified, investors are worried that Australia is slightly coming off the heat.

Fenner-Leitao is a portfolio manager from the F&C Asset Management.

Philip Bayley, meanwhilse, said NAB’s failure to sell its bonds is because the British investors may have had enough of Australian bank debt. NAB’s covered bonds were also similar to what Commonwealth Bank issued a week earlier.

Bayley said that Britain is a small market and is not really known for liquidity. Offering similar deals within just a week is not a good idea. Bayley is an ADCM Services principal.

Variant Perception also said that Australia is becoming more dependent on foreign funding. According to the US-based investment house, investors can see this as a risk to the banking industry.