Australian and New Zealand Bank Group (ANZ) test drove the first covered bond under Australia's new legal framework.

ANZ has raised $US1.25 billion ($1.24bn) from the first issue of covered bonds, according to a Dow Jones report. The transaction is a five-year U.S. dollar-denominated issue.

Standard & Poor's reported that guidance for pricing earlier this week was set at 115 basis points over mid-swaps.

The covered bond is expected to be soon followed by another dollar issuance from National Australia Bank and Westpac Bank, with Commonwealth Bank of Australia looking set to issue in Euros.

The Australian government estimated that there will be A$130 billion of such offerings in coming years, according to a Bloomberg report.

On Nov. 8, the the financial services industry prudential regulator Australian Prudential Regulation Authority (APRA) released for consultation a discussion paper that outlined its proposals to introduce a new prudential standard for authorized deposit-taking institutions (ADIs) that issue covered bonds.

According to APRA's Web site, the discussion paper is accompanied by a draft of Prudential Standard APS 121 covered bonds (APS 121).

The discussion paper called Covered Bonds and Securitization Matters and the draft prudential standard reflect the Australian government’s recent amendments to the Banking Act 1959.

The change makes it possible for ADIs to issue covered bonds. The regulator already took out the prohibition on ADIs issuing covered bonds from its prudential standards.

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