The Australian credit market has started 2026 with strong momentum, with more than $14 billion in new issuance in January alone, highlighting continued investor demand and a supportive environment for income-focused investors, according to Helen Mason, fixed income fund manager at Schroders.
Mason said the strong start to the year challenges the long-held view that local credit markets take time to gain momentum after the holiday period. However, broader economic backdrop continues to favour credit investors, with corporate earnings holding up and the impact of higher rates flowing through gradually.
“January issuance has been remarkably strong, exceeding $14 billion, demonstrating that both supply and demand remain firmly intact as we enter 2026,” said Mason.
“Even expectations of further rate increases later this year have done little to unsettle spreads, reflecting the ongoing appetite for yield.”
New issuance in January was dominated by domestic and offshore banks, alongside selected corporate deals. Notable transactions included the inaugural AUD bond from Hong Kong’s MTR Corporation which raised $2 billion, and $1.1 billion corporate hybrid from AusNet Services that attracted strong investor demand.
Demand was evident offshore, with several Australian banks issuing approximately US$6 billion in senior debt, as well as a €1 billion subordinated note.
Also read: Channel Capital and Wellington Management Deliver Global Multi-sector Credit Solution
Mason said investor demand remained strong across the month with most deals oversubscribed, and new issue concessions limited. Bond maturities totalled around $7 billion, roughly half the volume of new issuance, resulting in a net inflow of capital into the market.
“This supports our expectation that Australian-dollar credit can continue to grow in 2026, driven by rising superannuation assets, attractive yields and sustained demand from global investors, particularly Asia,” she added.
Mason highlighted Australian seaports as an area of ongoing interest within credit markets, citing their critical role in the economy and stable long-term cashflows.
“Ports handle around 99 per cent of Australia’s import and export trade, supporting approximately $650 billion in annual commerce. Their geographic positioning and pseudo-monopolistic market structures help maintain the stability and reliability of cashflows.”
While issuance from the sector was limited last year, Mason expects funding requirements to rise as infrastructure upgrades accelerate, including automation, channel deepening, land development and expansion of intermodal facilities.
Strong spread performance in January was led by Tier 2 subordinated bank paper, utilities and infrastructure according to Mason, but dispersion between sectors and issuers remains significant.
“In this environment, sector rotation and active management are essential,” she said. “Despite strong overall demand, relative value opportunities continue to emerge across sectors, curves and issuers.”
She said portfolio positioning currently favours senior and non-financial paper, while exposure to subordinated bank debt remains below long-term averages largely due to supply dynamics.
Mason also noted increasing exposure to high-quality issuers in the metals, mining and chemicals sector.
“We have selectively increased our allocation to investment-grade borrowers in this space, more than doubling exposure since October, while maintaining no exposure to sub-investment-grade miners,” she said.
“With strong fundamentals, persistent demand and supportive structural drivers, Australian credit appears well positioned for another constructive year.”
