How ‘Goose Eggs’ Are Causing A Significant Headache For Australia’s Four Biggest Banks

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This year’s US corporate debt market has seen numerous “goose egg” days when no one can or is enthusiastic about raising funds.

This number of these days exceeds even those during the zenith of the 2008 financial crisis.

This year, the world’s largest and usually most profitable debt market has not seen any difficulty in 44 days. Even during the worst of the 2008 Global Financial Crisis, only 25 such days were recorded. 

Since 2007, around 20 “goose eggs” (days with no trouble) have been laid each year; in terms of median value, this number is 18.5!

The market’s closure to new issues is more significant than it may seem; excluding Fridays (which generally have minimal activity) and public holidays, the market was closed on almost one of every four trading days in 2021.

The consequences of this for issuers are amplified by their need to offer current financials to investors. Generally, companies can only provide updated accounts and lawfully distribute them among a specific group of investors during certain periods of the year.

The unexplained market patterns are critical to Australia’s leading businesses that benefit from US debt markets for their financing needs, mainly the “Big Four” banks.

To support Australian financial institutions, the Reserve Bank of Australia(RBA) provided a whopping $188 billion through its term funding facility at an incredibly low-interest rate of 0.10%. 

“As of now, the goose egg market is causing a significant headache for Australia’s four biggest banks and other major financial institutions”, said an analyst. “However, we are hopeful that things will improve soon.”

Out of this sizeable sum, nearly $137 billion went toward the four significant banks alone. All banks have until 2024 to repay these funds, with a large repayment window opening in September next year.

“The situation is certainly not ideal, but we are confident that our banks will be able to manage their repayment needs and continue providing the critical financial services that Australia depends on”, said the CEO of one of Australia’s biggest banks.

They’ve discovered from their knowledge of the US debt market that it’s become more costly and difficult to obtain financing. To make matters worse, even the most highly rated banks can only secure funds with shorter repayment terms than before.

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