=DJ Uridashis Lead Oct Bonanza In Offshore NZD Bond Issues 2004-10-18 19:19 (New York) By John Barton Of DOW JONES NEWSWIRES WELLINGTON (Dow Jones)--October, although only half over, is shaping up to be the best ever month for offshore issues of New Zealand dollar or kiwi dollar bonds. In fact, October is already a banner month, with NZ$1.54 billion having been issued offshore in kiwi dollars, primarily in the retail uridashi market in Japan. Issuance of kiwi dollar-denominated bonds is expected to stay strong not just over the rest of this year but for even longer as mainly Japanese retail investors, but also European and Asian investors, chase high-yielding bonds and remain comfortable about taking on currency risk with the kiwi dollar. "I think we should see a steady flow of eurokiwi issues continue into the market. Australian dollar issues have had a good run, but some overseas investors have got themselves over-allocated to Australian bonds and now are looking to diversify," says Ben Hall, Royal Bank of Canada Capital Markets Australia director of originations. "There's potential for one or two eurokiwi issues a week over the next four weeks until the market begins to slow in the lead-up to Christmas," Hall said. So far in October, there have been five kiwi dollar uridashi bond issues and two Eurokiwi bond issues, plus the top-up of an existing eurokiwi issue, originally a five-year maturity. A senior official at a major Japanese investment bank agrees retail clients investing in kiwi uridashi bonds are currently looking to diversify out of Australian dollar investments. "Japanese investors are investing in New Zealand dollar uridashis because they can get coupons of 5%-6% for three years," the investment banker said. "While we might not see a whole lot more New Zealand dollar issuance over the rest of October, I'm sure we'll see more in November," he said. "Japanese investors are more confident about the performance of the Australian and New Zealand dollars than the U.S. dollar over the near term," the banker said. The NZ$1.276 billion tally of five separate uridashi issues announced for October so far has been bolstered by the presence of a larger-than-average NZ$724 million uridashi issued by the supranational Inter-American Development Bank. The NZ$724 million IADB kiwi dollar uridashi is the second largest ever issued. IADB in recent months arguably has taken over the leadership baton from the International Bank for Reconstruction and Development in the uridashi market. IADB's NZ$724 million 5.42% two-year uridashi this month followed its issue of a NZ$472 million 5.28% two-year uridashi bond in August and a NZ$293 million 5.30% three-year uridashi issue in February. Although the World Bank remains the largest uridashi issuer in New Zealand dollar terms, its NZ$150 million 5.54% two-year uridashi launched early October was its first kiwi uridashi since a NZ$514 million two-year 5.12% issue in late May. Earlier this year in March the World Bank issued a NZ$1.0 billion two-year 4.71% uridashi - the largest ever - while in January it issued a NZ$684 million three-year 5.35% uridashi. Estevan Molfino, a funding official at IADB, said that the NZ$724 million uridashi was issued as a result of reverse inquiry. "Uridashis are providing very attractive funding for us at the moment. In fact 50% of our US$4 billion of funding for 2004 will be in uridashis," Molfino said. "We're open for business to do more uridashis," he told Dow Jones Newswires. As well this month, Swiss bank UBS has issued NZ$16 million of five-year 1% uridashis and French state-owned funding agency Cades has issued a NZ$71 million 6.03% two-year uridashi bond, its fourth kiwi dollar uridashi this year. Also issuing kiwi dollar uridashis this month are National Australia Bank returning to the uridashi market for the first time since doing an Australian dollar issue last year. NAB this month issued a NZ$315 million three-year bond paying a 6% coupon. NAB's group funding manager Randolph Morrison told Dow Jones Newswires that uridashis at present are the cheapest source of New Zealand dollar funding, compared with either eurobonds or the New Zealand domestic market. "We're definitely looking to issue more uridashis both in New Zealand and Australian dollars," he said. NAB's group target for funding is between two years and five years but three-year is about the longest period Japanese retail investors are typically willing to invest for, he said. The two eurokiwis issued this month have been for longer than the two-year to three-year terms eurokiwis are more commonly issued for. The NZ$115 million 6.5% six-year eurobond issued by triple-A rated Eurofima, the pan-European funder of railway rolling stock, was done at a margin of 51 basis points over the New Zealand government 7% July 2009 bond. The odd size of the tranche was due to it being issued to the requirements of one particular investor. Late last week, Total Capital, a financing unit of the French oil giant, made its debut in the eurokiwi market with a 10-year issue paying a 6.75% coupon. The Total deal was reportedly done at 65 basis points over the 6% April 2015 New Zealand government bond. Monday an existing NZ$100 million 7% December 2007 eurokiwi issue by German landesbank Helaba was topped up by NZ$50 million at a reported 47 basis points over the New Zealand 8% November 2011 government bond. -By John Barton, Dow Jones Newswires, 64 4 4715-990; john.barton@dowjones.com. (END) Dow Jones Newswires 18-10-04 2315GMT(AP-DJ-10-18-04 2315GMT)