(Bloomberg) -- The fallout from September’s UK pensions turmoil looks to have left Australia’s securitized markets stronger as the subsequent hitch-free wave of stressed sales highlighted the depth of liquidity.
That’s the view of Neil Calder, head of portfolio management for credit at the European Bank for Reconstruction and Development. Australian assets were among those hit by the extraordinary sell-off as UK fund managers rushed to raise cash to meet margin calls.
The speed it took to complete deals for the South Pacific nation’s securities -- probably amounting to about $1.5 billion -- demonstrated that the liquidity and collateral quality present in the sector is perhaps better than many had thought, Calder said.
“It was a turning point in structured finance markets certainly outside of the US -- where the liquidity there is an assumed entity,” he said at the Australian Securitisation Forum in Sydney Wednesday. “The story is actually a good one.”
Global credit markets tumbled during September and October as UK pension funds dumped assets to meet margin calls that came after gilt yields spiked following moves from then-Prime Minister Liz Truss’s government to push through unfunded tax cuts. The Bloomberg Global Agg Credit index slumped to a nine-year low on Oct. 21, at which stage it was down 23% for the year.
The selloff provided a “proven case study of liquidity and the depth of liquidity” in Australia’s markets, Calder said. He expects the EBRD will consider the potential to lower the benchmark size for debt issuance it would participate in, which currently sits at about A$650 million ($435 million).
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