Investment-grade corporate Australia has weathered the COVID-19 crisis better than could have been expected as the pandemic accelerated in March and April 2020, according to participants at a Fitch Ratings-KangaNews roundtable at the end of the year. A supportive local debt market was just one of the factors behind this resilience.
Australian corporate and nonbank borrowers have made the most of a playing field left open to them by the absence of major-bank senior bond issuance since early 2020. Whether the credit market remains as deep for these borrowers once banks return is one of the biggest questions heading into the second half of 2021.
The 2021 iteration of the Fitch Ratings-KangaNews Fixed-Income Investor Sentiment Survey suggests Australian investor concern about COVID-19-related risk has eased. The buy side expects lending conditions to loosen further and net issuance to rise across asset classes – all predicated on the expectation of and reliance on support from ongoing unconventional monetary policy.
Most analysts anticipated the Australian housing market would take a hammering from COVID-19. More than six months into the crisis, house prices have held up better than expected and experience suggests the sector will be among the leaders of a future economic recovery.
On 7 October, following the announcement of the Australian federal government budget, the Australian Office of Financial Management (AOFM) revealed an expected funding requirement of around A$240 billion (US$170.5 billion) for the 2020/21 financial year. The announcement was no surprise to market watchers, but some analysts expect the Reserve Bank of Australia (RBA) may need to step up its market intervention.