Successful Financial Management
Having ready access to domestic and international capital markets is critical to our ability to complete the State’s borrowing program requirement, while delivering competitive pricing for our clients.
Maintaining a liquid funding curve in domestic financial markets allows WATC to raise the required funds to finance our clients’ borrowing needs, while providing savings to our clients and the State.
Maintaining Market Presence
Throughout 2017/18, WATC, in partnership with our Fixed Interest Dealer Panel, accessed domestic and offshore capital markets in the delivery of the funding and refinancing requirement of the State. This borrowing program was funded through a combination of issuance of our fixed rate benchmark bonds and floating rate note lines as well as short-term funding. This included the syndicated issue of a new 5-year floating rate note and a 10-year benchmark bond to extend the tenor of available funding options for clients. Additionally, WATC undertook a number of benchmark bond tenders. We also sought to further diversify our investor base by partnering with various members of our Fixed Interest Dealer Panel to deliver our offshore investor marketing program. Domestically, WATC participated in various fixed income conferences, one-on-one meetings with investors, and ended the year by hosting a 2018/19 post-budget investor presentation by the Treasurer of Western Australia.
WATC maintains a presence in international and domestic financial markets through our diversified funding facilities and by meeting legal, financial, corporate and statutory requirements. WATC complies with relevant legislation, regulatory requirements and policies and adheres to industry standards so that we maintain a good reputation, upon which our participation in financial markets is dependent.
Financing Clients’ Borrowing Needs
During 2017/18, $10.2 billion in fixed rate bonds and floating rate instruments was issued into capital markets to fund $4.9 billion of new lending and to refinance $5.3 billion of maturing debt. In conjunction with the lending activity, debt management strategies for a number of major clients, who represent over 75% of debt outstanding, were reviewed and updated to ensure alignment with client business objectives and improve governance oversight. WATC also executed over $115 million of foreign exchange transactions in 10 currencies on behalf of 18 clients.
At 30 June 2018, WATC managed in excess of $9.9 billion in investment funds in our own name and in that of our clients. This includes five investment portfolios managed on behalf of three clients, with an average annual investment balance in excess of $5.2 billion.
Realising Savings for Clients
WATC is able to deliver pricing benefits to our clients by consolidating the State’s borrowing requirement into large liquid bond maturities, which are backed by the State’s credit rating and the explicit guarantee of the Treasurer of Western Australia.
WATC also works with clients to find savings for their organisation, as well as cost-benefits for the State. WATC worked with the Department of Treasury to review short-term investment holdings across State agencies, which identified additional investments that could be included in the State’s liquid asset position. A resultant change in process enabled a reduction in the investment balance target and associated State borrowings, creating significant interest savings for the State.
Looking Ahead:
The borrowing program for 2018/19 is estimated at $8 billion, comprised of $2.7 billion of new money and $5.3 billion of refinancing.
For 2018/19, WATC expects to issue a new benchmark bond to extend the tenor of our bond curve and a new 5-year floating rate note.
Explore further opportunities to realise additional savings in managing the interaction between borrowing and investing activities done on behalf of the Department of Treasury.
Enhance the liquidity in existing lines of benchmark bonds by maintaining sufficient volumes on issue to retain benchmark bond status.
Previous: Providing Value to ClientsNext: Optimising Our Performance