DODDRELL Looking with a debt capital market lens, borrowers in Australia are scrutinising the secondary market for a number of reasons, including to ensure their primary bonds perform positively post-pricing. In addition, and in advance of any new primary issue, Australian borrowers also understand that secondary traders provide a valuable function by facilitating investors selling risk or generating cash to buy the new line. I believe New Zealand will start to see a similar focus from the corporate sector.

There is also nuance to the story. When an issuer comes to market a bank trader may buy the short lines to demonstrate that there is a bid in order to encourage investors into the longer dates. It may not always be visible but this kind of action in secondary strongly supports primary.

Westpac’s New Zealand head of trading, Alastair Wait, is moving with the bank to London to trade Australian and New Zealand dollar debt. Sending a very senior employee for this demonstrates how important we think secondary trading is to market function.

BOYLE If secondary marks are stale or nonexistent, it is very hard to determine the pricing range for a new issue and it is challenging to represent transparency in market pricing to a potential issuer. However, over the past year I have been receiving feedback that New Zealand has significantly improved in this regard.

BROWN An important aspect is ensuring trading books can access stock. No bonds limits trading activity. We want bonds to land with end investors – but these investors also need liquidity at times.

If trading books are receiving allocations in primary they can facilitate secondary flow in the new bond, which is usually the current bond of choice for investors. This flow of buying and selling generates more activity. The question we receive increasingly frequently from investors is ‘how much liquidity are you providing in the bond?’

DODDRELL This message needs to be heard by issuers in order that they can understand that they also have a vested interest in supporting market functioning. Liquidity in the New Zealand market is fickle at best – even our most liquid issuers, like New Zealand Debt Management, will go days without trading in its paper. If this is important to Australian participants, it should be more important in New Zealand because it is an even smaller market.

BROWN The domestic corporate market is small and challenging from a liquidity perspective. As a price maker, my view is that it is beneficial to have as many peers as possible pricing bonds. Doing so provides more clarity for investors on price and increases turnover.

The depth of price making is very important and, as Fiona says, making sure issuers are aware and support a well-functioning secondary market is important too.

MORRISON Secondary market liquidity has increased in recent months on the back of new corporate bond supply. The bid from retail investors remains strong, which is creating some performance in spreads.

MINHINNICK In listed markets, January and February were soft, which is not unexpected given the holiday season and the economic conditions. However, there was a pick-up in March. As inflation and interest rates begin to normalise, one would expect equity market activity to increase. The question is how long it takes for these underlying fundamentals to change.