Credit favoured despite market doubts

Australian asset owners and managers are keen on investing more in credit markets this year even as they remain apprehensive on market uncertainties. 

That is the finding of the BNP Paribas Capital Markets Outlook survey, which also found that 50 per cent of respondents feel official rates will rise in the second half of 2015. 

A third believe rates will rise later this year or early next year, while only 16 per cent expect interest rates will go down. 

Half of respondents predicted local spreads to become slightly tighter over 2014, while a third predict it will remain stagnant. 

Two thirds think asset-backed securities and structured products have the best value, while sovereign debt was the least valued. 

But several international credit issues are worrying market participants, including changes to US Federal Reserve Bank rate policy, a drop in China’s growth and another 'black swan’ issue in Europe. 

“Overall, it is interesting that investors remain so positively disposed to credit as an asset class despite the ongoing contraction in credit spreads,” head of fixed income at BNP Paribas in Australia James Hayes said.  

“The market is looking more optimistic than it has for some time.” 

Half of respondents have less than 10 per cent of their credit allocated offshore, the survey found.