In a move which goes against the trend of other state debt issuers at present, the Western Australian Treasury Corporation (WATC) has decided to issue $250 million worth of a new line of floating rate notes. While the issue of floating rate securities by state government borrowing authorities is not unusual, it’s not a particularly common practice either. WATC last issued floating rate notes in early October and NSW’s TCorp issued some July 2020s at the beginning of April but generally most state government funding has been by way of fixed rate bonds.
The choice between fixed or floating may be dues to investor demand or it may simply be a balance sheet risk management activity. It is not necessarily seen as a call on where the interest rate market is headed.
The latest notes are to be issued at a margin of 3 month BBSW + 22bps and at the end of November, WATC was expecting to raise nearly $4.7 billion for the 2015 / 2016 year, of which nearly $4 billion relates to maturing bonds and notes. So far this financial year, WATC has raised $1.865 billion, including the proceeds from this latest issue.