This quarter the volume of bonds exceeded syndicated loans, demonstrating the ongoing trend for borrowers to diversify the mix of bank debt vs. capital market funding. Global demand for fixed interest investments has corporate Australia looking offshore for both increased liquidity and longer tenors.
Given the increased level of competition from the corporate bond market (and offshore alternatives), thin deal flow and lower cost of wholesale funding for banks, we expect these factors to contribute to ongoing lower margins for investment grade credits in the bank loan market.
With respect to the corporate bond market, the spread between each credit band has widened, with the exception of AAA and AA credits which largely represent government and financial institution issuances.
Australian loan market falls to its lowest level for 3 years despite growing levels of liquidity from banks.
Emergence of Social Benefit Bonds in Australia.
Lease accounting changes on the horizon.
Is it time to consider exiting unfavourable interest rate hedges?