The Australian bond market had a strong second half in 2020 after the initial disruption caused by the COVID-19 pandemic.
Corporate issuance only kicked off in May with Woolworths’ $A1 billion bond which ANZ was joined lead manager and the momentum has carried through to 2021.
“The Aussie [bond market] was probably for natural Aussie borrowers, the most competitive market in currency for volume and for tenors,” Greenberg said.
Corporate bond volumes 2021 year to date are around $A7.7 billion with just over half executed in the weeks before and after Easter as issuers looked to lock-in competitive pricing.
The Australian bond market has remained extremely competitive price compared to other capital markets.
“Credit had really come in quite significantly [from the end of 2020], on average around 40 basis points depending on the sector and the issuer,” Greenberg said.
But after the surge in primary issuance, investors have become more selective when looking at new deals. This coinciding with issuers entering into their blackout periods has led to less activity, according to Greenberg.
Across institutional loan markets, volumes were softer last year after the initial surge with borrowers seeking incremental facilities for extra headroom due to the uncertainty of the pandemic.
As market conditions normalise, the surge in loan premiums last year has largely abated, Chappell said.
“That whole COVID premium is disappeared and we're back to normal from that perspective and the market is very, very competitive,” he said.
In current market conditions, bond issuers are continually seeking to diversify their investor base and funding requirements.
Issuers want to continue to diversify their funding requirements and they want to build a very strong investor base so that they're not confined to one market, according to Greenberg.
“They generally have access to a minimum of two capital markets,” she said.
The theme of diversifying is also a trend in the loan market, according to Chappell.
“I think the past 12 months has just reinforced the diversity argument about diversity of tenor, diversity of investor,” he said.
Investors in loan markets are also looking for more diversity of credit and are prepared to accept a lower return.
“Increasingly over the past couple of months, we're seeing more investors who want diversity of credit as well, prepared to take a slightly lower yield, not necessarily just purely targeting the high-yield spots in the loan market,” Chappell said.
Sharon Klyne is Associate Director, Communications, ANZ Institutional