The average size of bond sales in Australia by top-rated overseas borrowers has shrunk by almost 50 per cent this quarter as new bank capital rules cut demand. Offerings of AAA rated kangaroo debt have dropped to A$264 million (Dh1.02 billion) on average since March 31, the lowest since the credit crisis caused the market to slam shut in 2008 and down from A$516 million in the same period last quarter, according to data compiled by Bloomberg. Germany\'s Kreditanstalt fuer Wiederaufbau and Norway\'s Kommunalbanken are among state-backed borrowers that sold A$1.9 billion of the debt this quarter, compared with A$9.8 billion from January 1 through mid- February. Sales slowed from a record pace at the start of the year after the Australian Prudential Regulation Authority said in February the securities don\'t count as assets local banks must hold under Basel Committee on Banking Supervision standards. The ruling boosted demand for state debt that does qualify, cutting borrowing costs for Australia\'s regional governments. \"The ruling effectively took away a large cornerstone investor: the bank treasuries,\" said David Plank, Sydney-based head of research at Deutsche Bank AG. \"The market is having to find its feet again and find what\'s appropriate in terms of issuance size.\" Relative yields on state bonds have fallen five basis points this year, while spreads for US municipalities widened nine basis points, Bank of America Merrill Lynch indexes show. When Landwirtschaftliche Rentenbank sold A$800 million of fixed- and floating-rate 2016 kangaroo bonds in January, buyers from Australia and New Zealand took 77 per cent of the notes, with banks accounting for 72 per cent, according to Stefan Goebel, the Frankfurt-based development agency\'s head of treasury. Asian investors were the only buyers when Rentenbank sold a further A$200 million of the fixed-rate securities on May 9, he said. from / Gulf News