News
The Bank of Japan’s decision to ease its longstanding yield curve control policy, allowing the 10-year Japanese government bond yield to rise as high as 1 per cent, reverberated through global bond markets. While there is no expectation of an immediate, wide-scale change in Japanese investor behaviour, Australian fixed income sectors with a longstanding reliance on the Japanese bid have reasons to watch the policy path closely.
One of the main factors put forward to explain why Australian true corporate issuance continues to underperform in an otherwise largely positive local credit market is suboptimal execution practice. KangaNews goes inside the deal process with parties on all sides of transactions to understand why many market users believe execution is letting the local corporate market down.
The second survey of New Zealand institutional fixed income investors, conducted by BNZ and KangaNews in June and July, highlights some longstanding challenges in the local market – and some new ones. Investors continue to clamour for more issuance of high-quality credit, while progress on sustainable finance appears to be falling behind the hoped-for pace of evolution.
Some of the most important and fundamental driving forces in the fixed-income market are changing as the world moves from ever-increasing liquidity to a more restrictive outlook and policy approach. Participants at the annual ANZ-KangaNews fixed income trading and liquidity roundtable discuss global trends, local relative value, the return of the term premium and the potential shift of market norms that have prevailed for two decades or more.
With weakness in the US regional bank sector prominent in debt investors’ thinking and consolidation never far from the front pages, Australia’s nonmajor banks might have expected a challenging funding environment in 2023. Instead, solid balance sheets and the generally positive environment for financial credit have helped issuance maintain a steady path.
A brace of transactions by Australian university borrowers have kept the higher-education sector at the forefront of local sustainable debt financing. In particular, Macquarie University’s commitment to transparency in its sustainability-linked loan process demonstrates what deal sources insist is market-leading best practice for the asset class.
Alarming headlines about office vacancy rates are the most visible sign of a downturn in the commercial property space. While cyclical and structural factors are weighing on the sector, though, investors and rating agencies continue to back the sound fundamentals of its Australian issuers.
Private credit was very much in vogue in the last phase of the rates cycle as ultra-low yield led investors into this emerging sector in search of positive income returns. Higher rates have changed the equation, but sector participants say revised approaches to assessing private credit opportunities do not diminish its appeal – especially while borrowers continue to seek this type of funding.
A stellar August for Australian dollar new issuance was capped with yet another major-bank domestic deal record, in this case ANZ Banking Group’s A$5.5 billion three- and five-year print. Elsewhere, Heritage and People’s choice printed the largest-ever securitisation deal by an Australian mutual bank as the highlight of another busy week for structured finance supply.
Despite an active month for new issuance that saw more than A$25 billion of new credit supply, deal sources say ANZ Banking Group’s three- and five-year senior print on 31 August – itself the largest-ever domestic deal by a big-four bank – still left demand on the table. The scale of liquidity seen in August bodes well for Australian credit issuance in the short and long term.
