In 2020, a number of ongoing political tensions will continue, including those around the US presidential elections, the European Central Bank’s change of guard, Brexit, US-China trade tensions, North Korea, Middle East and Hong Kong’s political deadlock. These events are likely to increase volatility in the financial markets.
These tensions - especially around trade talks, including those between the US and China - are largely accepted by the market as a new norm.
The US presidential vote will be the crucial event to look out for. Spreads in the market are largely driven by liquidity and we will advise our clients to issue earlier in the year when liquidity tends to be the strongest.
Global sustainable debt has passed the $US1 trillion threshold and issuance of sustainability bonds almost doubled in 2019.
Sustainable bonds have been viewed as a good alternative to investment-grade bonds as they are usually in a more-conservative sector and risk profile.
Investors can enjoy the benefits of sustainable bonds as they are innovative, forward-looking and allow investors to participate in the reduction of ESG risk such as climate risk. Sustainable bonds are also viewed as a diversification tool for already mature and frequent issuers.
We expect sustainable bonds continue to benefit from overwhelming demand from investors compared to supply and continued interest from issuers to utilise the broader use of the proceeds to potentially fund both green and social projects.
Paul White is Head of Capital Markets and Jimmy Choi is co-Head of Capital Markets at ANZ