Building a fixed income culture

The under-development of Australia’s corporate bond market has been identified by local regulators and investment bankers as a potential Achilles Heel in an otherwise very robust financial system. Historically, this has not much mattered to the larger Australian corporates, which have always been given a warm welcome in the public and private US dollar markets. Nor has it mattered much to domestic investors, who have been comfortable with the risk-reward dynamics of the equity market. It may matter considerably more if the US dollar market becomes less accommodating towards Australian borrowers, or if the economics of offshore issuance become less favourable for borrowers without a US dollar requirement. It may also matter much more if Basel III capital charges or other external influences make bank debt scarcer or more expensive. And it will also matter when urgently needed infrastructure projects struggle to access longer-dated funding in the domestic market. The EuroWeek corporate roundtable invited issuers, intermediaries and investors to exchange views on the prospects for a deeper and more liquid range of funding options for Australian corporate borrowers.