Debt Market Update: Q1 2016

Debt Market Update: Q1 2016

The Australian debt markets experienced a slow start to 2016 with loan volume, although first quarters are typically quiet. Whilst supported by some larger M&A transactions, loan growth was weak with the outlook for the remainder of the year uncertain given global volatility and higher margins flowing to borrowers.

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Overseas markets experienced similar volume declines driven by lower activity from sub-investment grade borrowers impacted by the substantial fall in commodity prices (principally oil) and the higher yields required given elevated solvency concerns.

Key themes

  • Australian bank debt market – typical slow start to the year, although local market holding up better than offshore.
  • Australian bond market – exceptionally low volumes driven by uncertainty and higher margins.
  • US private placement market – declines in aggregate volume through weaker issuance from lower-rated borrowers.
  • Interest rates – historic lows for longer from the US, with Australia decreasing by 25 bps to an historic low of 1.75 percent in May 2016.

Australian syndicated loan volume

Source: Loan Connector (data extracted April 2016), KPMG Analysis

Australian syndicated loan volume, LTM by sector (US$b)

Source: Loan Connector (data extracted April 2016), KPMG Analysis

Debt Market Quarterly Update

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