Australian credit to grow despite rate concerns

Binaya Dahal

Editorial Intern, Financial Newswire

19 February 2026

Rising superannuation assets, attractive yield and sustained demand from global investors will keep Australian-dollar credit growing this year despite the fear of further cash rate hikes, fixed income fund manager at Schroders, Helen Mason says.

Mason said the market started the year strongly as the 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,” she said.

“Even expectations of further rate increase later this year have done little to unsettle spreads, reflecting the ongoing appetite for yield.”

According to Mason, strong spread performance was led by Tier 2 subordinated bank paper, utilities and infrastructure but dispersion between sectors and issuers remains significant.

“In this environment, sector rotation and active management are essential. Despite strong overall demand, relative value opportunities continue to emerge across sectors, curves and issuers,” she said.

She further stated that 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.

Moreover, Mason highlighted Australian seaports as an area of interest within credit markets given 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,” she said.

“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, she expects funding requirements to rise as infrastructure upgrades accelerate, including automation, channel deepening, land development and expansion of intermodal facilities.

Mason also noted increasing exposure to high-quality issuers in the metals, mining and chemicals sectors.

“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.”