‘Unprecedented’ Retail Slump Tanks Shopping-Mall Bonds: Australia Credit

http://www.bloomberg.com/news/2011-07-17/-unprecedented-retail-slump-tanks-shopping-mall-bonds-australia-credit.html?cmpid=

A drop in Australian consumer demand that sparked the biggest weekly slump in retail stocks in more than two years is spilling into the nation’s credit markets.

“The weakness in the Australian retail sector has taken a further leg down, and we expect an increasing number of retailers will be requiring rent assistance or being forced to close their stores and default on leases,” said Ben Byrne, a Sydney-based credit analyst at Nomura Australia Ltd. “While this will have a greater impact on equity, it will also cause a general underperformance of the sector in credit.”

Australian homeowners are more pessimistic about the housing market as falling prices and slowing rental growth damp growth expectations, a National Australia Bank Ltd. poll showed June 14. Home prices fell 2 percent in the second quarter and rental growth slowed to 1.3 percent, Australia’s fourth-largest lender said in an e-mailed report.

Mortgage holders are grappling with the highest benchmark interest rate in the developed world after RBA governor Glenn Stevens raised the benchmark seven times between October 2009 and November 2010 as he sought to control price pressures from the nation’s biggest mining boom in a century.

The Australian dollar, the world’s fifth-most traded currency, fell 1 percent last week to $1.0653 on July 15 in New York. The so-called Aussie has risen 22 percent against the greenback in the past 12 months, and traded at $1.0606 today.