LISTEN: the year of the borrower (again)

Strength across both bond and loan markets in recent weeks has 2025 poised to be another “year of the borrower”, according to ANZ’s Gavin Chappell, with record quarterly activity expected.

Chappell, ANZ’s Head of Loan Syndications, told an On Air with ANZ Institutional podcast that markets had experienced a “super strong” start to the year, in terms of demand for both loans and bonds, amid very favourable conditions and high levels of liquidity.

“The borrowers are going to be the winners here because the market is so strong for them,” he said. “And it doesn't matter whether it's loans or bonds. Either solution can provide a really attractive option.”

Chappell made the comments in conversation with Gwen Greenberg, Head of DCM Australia at ANZ Institutional, ahead of the 2025 ANZ Debt Conference in March. You can listen to an edited version of the conversation on podcast below.

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Greenberg said the bond market had seen a record start to 2025, particularly for corporate issuance, driven by high levels of liquidity and what seems like “insatiable demand”, with ANZ helping two of three corporate issuers that came to market before Australia Day alone.

“It's been a really big start to the year so far, and I do think the pipeline continues to build,” she said. “My expectation is that this continues.”

Debt markets saw record activity in 2024, Greenberg said, with deals being priced well into December - and that momentum has continued.

“I think it will be another record first quarter for [debt and capital markets] as well,” she said.

Chappell said the same strength has been seen across loan markets so far in 2025. In 2024, activity in loans was heavier in the latter parts of the year, and Chappell had expected to see a similar split in the new year.

“But that's now, in just in a matter of weeks, totally shifted,” he told the podcast. “Our pipeline is looking as strong as it ever has.

“I think the second quarter this year is going to be super strong, certainly better [the same quarter in 2024], and probably… heading towards where we were in the fourth quarter last year.”

Driver

Chappell said the key factor driving the momentum was high levels of liquidity in the market, largely from multinational investors in the Asian region, thanks in part to a lack of merger and acquisitions in recent times.

“Loan volumes in Asia over the past couple of years have been relatively weak,” he said. “What that's meant, from an Australian perspective, is lenders and particularly banks in the region are just not seeing enough activity, and not seeing enough deal flow.

“So there's huge amounts of liquidity and particularly huge amounts of liquidity chasing Australian assets,” he said.

That’s had an impact for Australian borrowers in the loan space, with tenors being pushed out, according to Chappell.

“I think from an outlook perspective as it relates to pricing, we'll probably see further price tightening in 2025 as well, because that liquidity story still looking at remaining strong throughout 2025,” he said.

Greenberg said the bond market was also benefiting from high levels of liquidity, out of both Australian and Asian investors, but there were some differences in drivers compared to loans.

“We're also seeing, because of the lack of loans, [bank balance sheets] not getting the supply that they want,” she said. Those organisations are now transitioning into the corporate bond market to fill the supply gap, according to Greenberg, providing additional liquidity.

“We have a widening investor base both domestically and offshore," she said. "And that liquidity is key. It's driving down spreads and there's not enough supply to reach the demand that's there."

Greenberg said the pipeline of activity was still continuing to build, with issues eager to get into the action.

“Issuers are, instead of waiting and seeing, wanting to grab a spot… in the queue,” she said.

“And we've noticed that there's been a big uptick in offshore issuance or debut issuers in the DCM market.”

The experts also spoke about the upcoming 2025 ANZ Debt Conference. Listen to the podcast above to find out more.

Judy Hang is a Contributor at ANZ Institutional

This note reflects the edited version of the conversation as it appears on the podcast