Despite concerns about uncertainties in the markets, Australian asset owners and managers are expected to invest more in credit markets this year, according to BNP Paribas’ Capital Markets Outlook study.
The poll found that the majority of respondents expected official Australian rates to increase in the second half of 2015 (50%). A third expected them to increase soon, being later this year or early next year. Some 16% went against the consensus and expected the next move in interest rates to be down.
Half of respondents expected local spreads to become moderately tighter over 2014, while a third expected them to remain unchanged.
Interestingly, two thirds believed the best value is in asset-backed securities and structured products. Sovereign debt was the least-favoured class according to the analysis.
The study also found that several credit issues keep market participants awake at night, including concerns over changes to US Federal Reserve Bank rate policy, a drop in China’s growth and another “black swan” issue in Europe.
James Hayes, Head of Fixed Income at BNP Paribas in Australia, said: “Despite these concerns, half of the respondents expected flows into credit funds to increase this year. Overall, it is interesting that investors remain so positively disposed to credit as an asset class despite the ongoing contraction in credit spreads. The market is looking more optimistic than it has for some time.”
BNP Paribas is one of the world leaders in credit, ranked #1 on the Dealogic DCM League Tables for Australian corporate Euro-market public transactions in 2013 and won best international bond deal out of Australia 2013 from AsiaMoney and Finance Asia. In addition to debt capital markets, BNP Paribas offers a broad range of products and advisory services in the global interest rate, credit and currency markets, global transaction banking and cash management and loan syndications and trading to local and international institutions.
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