After false starts, Australian domestic corporate bonds have finally come of age this year. Although the market is not yet fully mature, in the past half year or so there has been a significant increase in the number and size of corporate issues. So far there is no sign of a slackening of this trend.
In the three months to the end of February, more than A$2.3 billion (US$1.8 billion) was added to domestic debt by corporate bond issues, according to a study by Westpac Bank. February was lively, with more than A$1 billion in fresh non-government issues. Westpac predicts that by December this year corporate issues will have exceeded A$4 billion, with no noticeable widening of spreads.
The market is exhibiting satisfactory liquidity, with secondary trades being negotiated more or less readily. Some of the underwriters and investment banks now take principal positions for short periods in order to facilitate transfers.
Increased corporate bond issuance has been matched by robust demand from investment institutions. This has held back any tendency for spreads to blow out, as happened in earlier, eventually unsuccessful periods of market growth.