OREANDA-NEWS. Australian investor sentiment has dipped in the face of a slowing domestic economy, according to Fitch Ratings who has today, announced the results of its third Australian fixed-income investor survey. The surveys are undertaken in partnership with KangaNews - a specialist publishing house that provides commentary on fixed income markets in Australia and New Zealand.

Not one investor expects the Reserve Bank of Australia to raise interest rates over the next 12 months, which is a noticeable shift in sentiment from our 4Q14 survey, where not one investor thought rates would be lowered. Some 46% of investors surveyed expect rates will be cut by 25bps, while 36% expect a cut of 50bps. Views were also more pessimistic towards Australia's labour market, with 54% of investors expecting the unemployment rate to be at or above 6.5% by end-2015, compared to just 21% in our 4Q14 survey.

Developments in the eurozone are also weighing on sentiment. 36% of investors consider eurozone sovereign debt problems and deflation as a high risk to Australian credit markets over the next 12 months, compared to 23% for poor commodity prices. The eurozone moved into second spot, up from fifth in our 4Q14 survey, while a China hard landing still tops the list of investor concerns.

A dip in sentiment is also evident in investors' expectations for fundamental credit conditions over the next 12 months, particularly in the sovereign, semi-government and financial sectors. This is not having a material impact on risk appetite, with 73% of respondents still looking to add or maintain credit, although investors do expect issuance levels to moderate. Just 28% expect non-financial corporate issuance volume to increase, down from 55% in 4Q14, while the percentage expecting structured finance (RMBS, ABS) issuance volumes to increase has come down to 50% from 83% in our 4Q14 survey.

Property market exposure poses the greatest threat to Australian bank credit quality over the next 12 months according to respondents. All investors surveyed rate this exposure as a critical or important risk, up from 84% in our 4Q14 survey. Lending to investment grade corporates is considered the area where lending standards are most likely to loosen, however a growing percentage of investors also expect corporate leverage to remain broadly unchanged over the next 12 months.

Fitch's 2Q15 survey was conducted between 4 March and 16 March 2015 and represents the views of managers of more than AUD200bn of fixed income assets which accounts for over three-quarters of the Australian domestic real-money market. This survey is unique in the Australian context, reflecting the partners' strong ties with the local investor community.

The full survey is available on www.fitchratings.com or by clicking on the link above. Findings will also be presented at Fitch Australia's 2015 Annual Credit Insights Conference on 13 May.