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Credit at Record High

29 June 2020 by News Desk

Credit at Record High: Loan borrowings ($43.7b) by other private non-financial corporations (private trading corporations) were the highest on record in March quarter 2020.

Net maturities of corporate bonds ($8.7b), predominantly with the rest of the world, were the highest since March quarter 2017, as companies let existing bonds mature this quarter and issued less due to low investor demand and widening spreads in yields.

Equity raising ($5.9b) was the second lowest since December quarter 2012, with equity placements subdued this quarter.

Net bond issuances of $14.5b drove national general government’s demand for credit ($20.2b).

The RBA increased their holdings of Commonwealth government bonds by a record $42.2b, reflecting the central bank’s monetary stimulus measures announced in March in response to COVID-19.

State and local general government’s demand for credit ($18.2b) was also the highest on record, due to increased funding requirements for bushfire recovery and COVID-19 support packages. This is consistent with strong bond issuance by central borrowing authorities this quarter.

Households’ restrained demand for loans continued this quarter ($2.0b).

Long term loan borrowing ($7.7b) was the second weakest since September quarter 2012, while the fall in short term loan borrowing (-$5.6b) was the strongest on record.

Credit market

Despite the strong increase in demand for credit during the quarter, significant valuation decreases caused credit market outstanding to fall 3.4% (-$253.4b), the largest decrease on record.

The fall was driven entirely by valuation losses on shares and other equity of other private non-financial corporations (-$340.7b) and private non-financial investment funds (-$60.9b), reflecting significant falls on the stock market during the quarter, largely in reaction to the evolving and anticipated economic impacts of COVID-19.

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