Get the latest KPMG thought leadership directly to your individual personalised dashboard
Close
Notice of updates
!
Since the last time you logged in our privacy statement has been updated. We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. You will not continue to receive KPMG subscriptions until you accept the changes.
Close
Hi
!
Our privacy policy has been updated since the last time you logged in
We want to make sure you're kept up to date. Please take a moment to review these changes. You will not receive KPMG subscription messages until you agree to the new policy.
Close
Hi
!
Debt Market Update – Q3 2020
Debt Market Update – Q3 2020
In Quarter 3 of 2020 there is no substantial change in debt market conditions and activity from last quarter.
Debt Market Update – Q3 2020
In Quarter 3 there is no substantial change in debt market conditions from last quarter.
Markets and sentiment continue to be influenced by COVID-19 developments both globally and domestically with conditions improving marginally within the Australian market, but a generally cautious approach taken by borrowers, lenders and investors.
Market Outlook
The continued escalation in the outbreak of COVID-19 around the globe and the onset of further waves of infections presents itself as the primary threat to both global and domestic economic growth.
One of the major ongoing challenges facing governments, capital markets and borrowers is the unknown scale and long term economic impact resulting from COVID-19 and what will be the ‘new normal’.
Despite this uncertainty, debt capital markets remain liquid and functioning. This is underpinned by substantial Government policy stimulus measures, which we expect to continue to play a significant role in the short to medium term until the economic effects from COVID-19 have plateaued.
The Reserve Bank has communicated over recent months that it would not increase the cash rate target until economic conditions improve and inflation is sustainably within the target range of 2 percent – 3 percent p.a. Based on its current outlook for the economy and its recent expansionary policy package announcement, this is still some years away. The RBA has noted it does not expect the cash rate to be increased for at least the next 3 years.
We expect financiers to continue to approach lending opportunities with a heightened degree of caution, however, we also expect banks to selectively grow balance sheets to defend and grow market share.
The Australian debt market is now far more diversified given the increased penetration of international banks and the range of non-bank lenders active in the market across the credit spectrum.
This landscape will present some interesting dynamics for borrowers and lenders. We expect non-bank lenders to grow their share of the Australian lending market going forward.
As we wrote last quarter, it is no longer a borrower’s market and ‘liquidity remains king’, despite a continued modest improvement in market conditions during the quarter. However, borrowers that position themselves to have access to a range of funding options, have a well-developed funding plan, and have engaged in robust contingency planning will still achieve good funding outcomes.