Australian structured finance issuance slowdown imminent in 2023: S&P

The multiple interest rate raises will begin to bite on issuers.

Australia’s structured finance issuance is expected to taper off in 2023 amidst growing funding costs and a slowdown in lending, according to a new report by S&P Global Ratings.

“Economies are recalibrating in response to ongoing interest rate rises, and structured finance issuers have had to quickly adapt to sharp increases in funding costs. This comes amidst strong lending competition and an expected deterioration in collateral performance, though this is yet to meaningfully surface in most transactions,” S&P said in the report "2023 Structured Finance Outlook: Australia And New Zealand."

2023 will offer little reprieve, the ratings agency warned, with monetary policy expected to further tighten over the year and multiple interest rate rises beginning to bite.

“Nonbank issuers have been at the epicenter of these trials, balancing steeply widening spreads and strong lending competition,” it added.

On the upside, issuers have become adept at navigating volatile funding conditions by nimbly altering plans and funding programs as conditions change.