By Callum De Forrest
Runs AUD trades for global issuers including Sovereigns, Banks and Corporates from the Syndicate desk in Sydney.
For what was once regarded as a vanilla Financial / SSA based market, 2017 saw a fundamental shift in investor appetite towards diversification. While demand for corporate issuance has been evident for the last few years, domestic investors had been reluctant to pay the spreads offshore markets offered. Last year that changed and, coupled with aggressive demand out of Asia, particularly for utilities, we saw a 176% increase in corporate issuance. While we are unlikely to see the same percentage growth through 2018, we continue to expect the composition of corporate issuance in total AUD outstanding to grow.
Not only has corporate issuance increased, but the tenors available to issuers have also lengthened from the typical 5 year point. While 5, 7 and 10 year remain the norm, we were a JLM on a 15 year trade for Deutsche Bahn, the longest public corporate trade in AUD. This is a tenor only government and SSA issuers have historically been able to print.
The combination of strong Asian demand and the aggressive need for domestics to diversify has seen deal sizes increase. Large multi tranche deals for Verizon and Ab InBev, around the AUD2bn area, show the Australia market is maturing into a sophisticated, reliable funding source for issuers. We expect to see new global names look to access this market through 2018 following the success of those trades.
Investors have not only shifted their focus to corporates, they are willing to accept global docs. Historically this market has been domestic / Kanga doc dominated, however investors are willing to accept trades using global docs like EMTN / SEC if it gives them access to new issuers.