The domestic housing market has soared as a risk factor in the minds of Australian fixed-income investors according to the latest Fitch Ratings (Fitch)-KangaNews Australian Fixed Income Investor Survey. A deeper look at the data suggests investors believe risk is contained, but the survey as a whole points to expectations of a slowing economy.
Australia’s sovereign rating will be tested in the coming months as the ramifications of the COVID-19 crisis play out through the economy, according to Fitch Ratings. A newly placed negative outlook on Australia’s AAA rating relates to significant downside risks in the domestic economy, including household debt, as well as global factors such as newly levied trade barriers.
One easy conclusion to draw about the COVID-19 pandemic is that the measures put in place to fight it will cause unemployment to rise precipitously. Anticipating this, lenders have already begun offering loan payment holidays and other types of forbearance.
COVID-19 and its economic and market impacts evolved at a dizzying pace through the first quarter of 2020. KangaNews plots the key developments with a focus on those most relevant to Australian and New Zealand debt capital markets.
Fitch Ratings and KangaNews have been conducting the Fixed-Income Investor Survey since the first half of 2014. The 2020 iteration combines a deeply negative outlook with vast areas of uncertainty to produce the survey’s most worrying set of data ever.
Fitch Ratings (Fitch) downgraded the long-term issuer default ratings of the Australian major banks and their New Zealand subsidiaries on 7 April, to A+ from AA-, and kept all four on negative outlook. The decision reflects the expected effect on core markets and bank operations of measures being implemented by governments to limit the spread of COVID-19.