The pace of early-year SSA Kangaroo issuance in 2024 outstripped all previous records. Whether or not the full year produces record supply once more – and intermediaries have their doubts that the tailwinds of 2023 will remain in place – there are reasons to believe the sector has reached a new level of baseline demand and thus deal flow.

The Australian Prudential Regulation Authority’s plans to uplift liquidity rules for a swathe of smaller local banks is likely to shake up the sector once more, market participants say. The increased cost of funding liquidity books and likely loss of demand for their wholesale debt instruments may be enough to spark further consolidation among financial institutions with smaller and less established capital markets presence.

After back-to-back record issuance years, it is clear that increased capacity for Australian dollar financial institution bonds is not just a post-pandemic rebound but representative of at least some degree of system growth. A raft of domestic and international banks benefited in 2023, including finding ample liquidity across the capital stack.

The Australian Prudential Regulatory Authority suspects the major banks’ additional tier-one funding instruments are increasing risk in the sector. The regulator has reopened the debate about the amount of this form of capital in banks’ mix and the appropriateness of AT1 for retail investors.

The Australian and New Zealand securitisation sector has grown significantly in recent years, driven by a proliferation of nonbank lenders. With rates rising for the first time in years and an economic downturn on the horizon, the market is readying itself for ongoing challenges. But participants at the Australian Securitisation Forum’s annual conference, which attracted a record attendance to Sydney at the end of 2022, say the industry is well positioned to manage them.

The Australian Prudential Regulation Authority’s final guidance on a principles-based approach to ensuring financial institutions appropriately manage climate-related financial risk comes as a growing cohort of nations signal intentions to introduce mandatory regimes. Some observers compliment the Australian approach while others fear it could exacerbate jurisdictional divergence.

The Australian Prudential Regulation Authority’s decision to reduce the size of the committed liquidity facility to zero by the end of next year may not be entirely surprising but it has ramifications across the local fixed-income market. The most obvious are on the demand side, but a closer examination of the decision’s implications also reveals likely consequences for supply dynamics.

Australian house prices have once again defied expectations, this time from the early stages of the COVID-19 pandemic, by resuming a seemingly unstoppable upward trajectory. While the Reserve Bank of Australia continues to insist rate hikes are not coming in the medium term, speculation is mounting about macroprudential intervention and financial-stability risk.

The Australian Prudential Regulation Authority released its draft prudential practice guide on climate-change financial risks for consultation on 22 April, setting out voluntary prudential management related to governance, risk management, scenario analysis and disclosure. Some industry participants are urging the regulator to use this as a first step to mandatory risk disclosure.

The Basel Committee on Banking Supervision published a report on 14 April detailing the transmission mechanisms of physical and transition climate risks into financial stability risk. Risks can be observed through traditional lenses, but the committee says more research is needed fully to understand the potential impact of climate change on the financial system.