The Australian credit market has picked up over the past month but the recovery has been patchy and there has been very little primary issuance, a fund manager reports.

Perpetual gave a presentation to investors in its ASX-listed Perpetual Credit Income Trust this week, saying credit spreads have retraced from wider marks since March, which saw the most significant widening since the GFC, but not uniformly across sectors or individual securities.

Perpetual’s head of credit and fixed income, Michael Korber, and senior high yield analyst, Anne Moal, told investors that the government and Reserve Bank responses on the bank debt front has seen this sector recover faster than non-financial corporate credit.

“Banks have retraced their widening in February and March,” Korber said.

However, “non-financial corporate spreads lagged in April, failing to retrace the losses seen through late February and March”.

Korber said the Australian market has seen a significant reduction in primary market issuance and secondary market liquidity. Secondary loan trading has been “negligible”.

Lower liquidity in non-financial corporates, relative to financial credit, has slowed the recovery in the sector.

“This is in contrast to the US where abundant issuance over the past two months has been met with increasing demand. Rather than issuing in the local market, domestic issuers such as Transurban and Telstra pursued offshore markets to raise capital,” Korber said.

Perpetual Credit Income Trust has $388 million invested in 93 holdings. Some of its investments are sourced from an in-house private loan fund. Perpetual has its own credit team that manages loan originations.

During April, the fair value of certain private loan assets within the portfolio was revised downward as a result of economic conditions and recent movements in corporate credit spreads.

This has been reflected in the fund’s NTA, which fell 5.1 per cent in March and April.

Among its other holdings, the fund has securities issued by NAB, Bank of Queensland, Westpac and Bendigo and Adelaide Bank. Other financial holdings include IAG, Suncorp and Barclays.

Investment grade non-financial investments include AB InBev, Coles, Aurizon ad BlueScope.

Non-investment grade holdings make up 41.2 per cent of the portfolio and include MYOB, Next DC and I-Med Radiology

There have been no defaults in the high-yield portfolio. “We believe the underlying assets are performing well,” Moal said.