Demand for corporate bonds is increasing in the institutional sector but the market is still immature, according to banking executives at the Financial Services Institute of Australasia (FINSIA) conference in Sydney.
Although interest from super funds was there, the market for corporate debt was still scarce - 90 per cent of the 70 tickets in the BHP transaction earlier in the week had been super funds and insurance firms, Julie Hunter, head of loan product, global loans and transaction banking, international and institutional banking, ANZ said.
"The Australian market, while I think it is really solid and robust, particularly for a quality corporate credit like BHP, nonetheless is actually a reasonably modest-sized market," she said.
The $1.3 trillion super industry allocated $150-$200 billion to fixed income and cash (about 15 per cent), which posed an asset allocation question for the industry, according to Hunter.
Rob Whitfield, chief executive, Westpac Banking Institutional Bank, said Australian corporates had gone offshore because of attractive tenure terms and because some mid-size entities had not needed a rating.
Whitfield said those issues still needed to be resolved, but due to increased regulatory costs and the increased cost of swaps, he expected Australian corporates to return home for local funding.
Christine Yates, National Australia Bank's managing director and head of debt markets origination, said corporate bonds would not tap into Australia's "massive pension pools" and the growth of the self-managed super fund sector until the fixed income sector become as accessible as equities markets.
"Go online and click and buy and click and sell for $30 through a broker on equity - that's what needs to happen with fixed income so everyone has more choice besides property, deposits and equity to invest in," she said.
The fall-out from the economic crisis had focused on volatility, but Yates questioned if the bigger risk could be the lack of confidence in corporate Australia.