Credit updates:
- Corporate bonds have continued to be well supported domestically as equity markets exhibit increasing volatility, and the safety of bonds as an asset class has become more appealing.
- Primary issuance of corporate bonds remains light, adding to the natural bid for bonds in the secondary market.
- NextDC are running investor updates with a view to issue a new 4yr bond. Interestingly we have not seen holders of the 2021 bonds selling, but rather happy to hold. This underlines the stable nature of the NextDC bond curve and attractiveness of the yield it offers.
Macro comment:
The following factors were impacting bond pricing this week:
- Benchmark US 10yr treasury yields are 1bp lower than a week ago at 2.88% as fears of a US/China trade war remain in investors minds and stock markets begin to turn lower.
- In Australia short term funding pressures for banks have caused some smaller lenders to increase mortgage rates, further reducing the need of the RBA to hike rate. Increasingly some market commentators are speculating that the next move in official interest rates may be down, not up.
ABX Colour:
A deepening sense of unease is rippling through China’s financial markets. As their stock market tumbles down 20% in the past 5months and 8% in the last 2 weeks. This has overflowed in other stock markets around the globe, all tracking in the red with growing concerns of the start of a bear market. Add in the US/China trade war mentioned last week the market is firmly trading with risk off.
Equity markets could continue this tough track as people flow into the security of fixed income assets. Secure your investments in a more stable market and invest in direct bonds locking in your returns. Holding fixed rate bonds to maturity locks in the return you gain on your investment today.
Call your ABX representative on +61 2 8076 9343 or visit our website https://www.bondexchange.com.au/ to find out more.
Follow Us @AusBondExchange
Weekly commentary and direct bond investments ABX weekly 27/06/18
Australian Bond Exchange Pty. Ltd. (“ABX”) provides both general and specific financial product advice. This document and any information, advice or recommendation has been provided by ABX without taking account of your objectives, financial situation or needs. Because of this, you should before acting on any information, advice or recommendation from ABX consider the appropriateness of the information, advice or recommendation, having regard to your objectives, financial situation and needs. If this document, or any information, advice or recommendation, relates to the acquisition, or possible acquisition, of a particular financial product, you should obtain a product disclosure document relating to the product and consider the document before making any decision about whether to acquire the product. ABX, its directors, representatives, employees or related parties may have an interest in any companies or entities, or any financial product issued by companies and entities, and may earn revenue from the sale or purchase of any financial product, referred to in this document or in any information, advice or recommendation. Neither ABX, nor any of its directors, representatives, employees, or agents, make any representation or warranty as to the reliability, accuracy, or completeness, of this document or any information, advice or recommendation. Nor do they accept any liability or responsibility arising in any way (including negligence) for errors in, or omissions from, this document or any information, advice or recommendation. Any reference to credit ratings of companies, entities or financial products must only be relied upon by a “wholesale client” as that term is defined in the Corporations Act 2001 (Cth). ABX strongly recommends that you seek independent accounting, financial, taxation, and legal advice, tailored to your specific objectives, financial situation or needs, prior to making any investment decision. ABX does not make a market in the securities or products that may be referred to in this document.