South Australia Pulls Out Of Syndication As Market Conditions Deteriorate

By Sophia Rodrigues

(Sydney, November 9, 2021)—The South Australian Government Financial Authority (SAFA) has pulled out from its proposed issuance of May 2030 tap syndication, in a sign that investors are less enthusiastic about new issuances amid volatile market conditions.

It shows that markets have not yet stabilized from the volatile moves that began around three weeks ago as they remained unconvinced of the Reserve Bank’s outlook that still points to cash rate hike in 2024.

SAFA has not cancelled the issue entirely and will re-enter the market when conditions permit.

In a statement, SAFA’s director of Treasury Services Andrew Kennedy said, “the decision to postpone is in response to investor feedback due to a deterioration in broader market conditions over the course of today.”

The issue was a syndicated tap of A$500 million of 2.75% 24 May 2030 bond line and the joint lead managers were Citigroup, Deutsche Bank and Nomura.

It was launched earlier Tuesday with an initial price guidance of 17-19 basis points over 10-year futures and was working out to 30.2 to 32.2 basis points over the May 2030 Australian government bond.

SAFA’s expectation was the market would stabilize Tuesday but it did not, with price moving towards 19.5 basis points. As a result, it decided not to go ahead with the syndication now.

“This is a decision that has not been taken lightly, but we believe it is in best interests of the investor base and market as a whole,” Kennedy said in a statement.