An international fund manager has noted Australian credit markets started 2026 with significant momentum, recording more than $14 billion in new issuance during January, and has predicted further growth for the sector in the coming year.
Schroders fixed income fund manager Helen Mason said the activity last month highlights continued investor demand and a supportive environment for income-focused strategies.
The manager indicated the volume of new issuance challenges historical trends where local credit markets typically require time to gain momentum post-holidays.
“January issuance has been remarkably strong, exceeding $14 billion, demonstrating that both supply and demand remain firmly intact as we enter 2026,” Mason explained.
She pointed out even expectations of further rate increases later this year have done little to unsettle spreads.
Activity was dominated by domestic and offshore banks, alongside selected corporate deals, including a $2 billion bond sale by MTR Corporation and a $1.1 billion hybrid issuance from AusNet Services. With bond maturities totalling around $7 billion, the market saw a net inflow of capital.
Strong spread performance was led by Tier 2 subordinated bank paper, utilities and infrastructure. Schroders warned dispersion between sectors remains significant.
“In this environment, sector rotation and active management are essential,” Mason indicated.
“Despite strong overall demand, relative value opportunities continue to emerge across sectors, curves and issuers.”
She identified Australian seaports as a key area of interest due to their stable long-term cash flows and critical economic role. Looking ahead to the remainder of 2026, the market is expected to expand further.
“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 cash flows,” Mason acknowledged.
Further, Schroders has selectively increased allocations to investment-grade borrowers in the metals, mining and chemicals sectors, while maintaining zero exposure to sub-investment-grade miners.
Rising superannuation assets, attractive yields and sustained demand from global investors were highlighted as key drivers for a strong domestic credit market.
“This supports our expectation that Australian-dollar credit can continue to grow in 2026,” Mason noted.