ABE Weekly 07/10/2020

Market Update  

 

“It is what it is” 

 

It’s funny, the above quote says a lot and nothing at the same time but is probably one of the most used quotes at present. Most recently it was used to describe the COVID situation in the US but as far as the bond market is concerned it is what it is. Interest rates are ridiculously low but unfortunately as stated by the RBA it is unlikely to change in the foreseeable future – at some point the can is going to run out of road. The reality is there’s not much wiggle room when it comes to changing interest rates given how low they already are.  

 

On the home front it was all about the RBA meeting and the federal budget…. last night Oct 6. There was some talk the RBA may cut rates 15bps to 10bps, but the official cash rate was left unchanged for the time being. The AUD initially rose but then dropped all the way back. We won’t bore you with all the detail from the budget, but it was no surprise that it all centred on resuscitating the economy…. tax cuts, welfaresmall business support and the like. 

 

Thought it would be interesting to note where the current 10YR bond yields are trading in the major economies around the world (see table below) in comparison to current attractive yields still available in Australian corporate bonds. 

 

At ABX we are still active in NXTDC Fixed 2021 at 5%, NAOS Fixed 2024 at 4.7% and CNI Fixed 2023 at 5.08%. We are also very excited about the upcoming launch of a new $30m 4 YR issue yielding 7.5% which is sure to be very popular. 

 

Aside from the riskier economies of India, Brazil and Mexico all are sub 1% and, and in some cases even negative – check out Switzerland at minus 0.49% (which has been negative for almost a decade). 

  

10Y BND      Yield  Day  Weekly  Monthly  Yearly  Date   
  US  0.73   0.03  -0.03%  0.09%  0.05%  -0.82%  Oct/06 
  UK  0.29   0.00  0.00%  0.10%  0.04%  -0.16%  Oct/06 
  Japan  0.04   0.01  0.01%  0.02%  0.00%  0.26%  Oct/06 
  Germany  -0.51   0.01  0.01%  0.03%  -0.05%  0.07%  Oct/06 
  France  -0.24   0.00  0.00%  0.03%  -0.08%  0.03%  Oct/06 
  Netherlands  -0.40   0.07  0.07%  0.08%  0.01%  0.03%  Oct/06 
  Switzerland  -0.49   0.00  0.00%  0.02%  -0.04%  0.28%  Oct/06 
  India  6.03   0.02  0.02%  -0.01%  0.04%  -0.64%  Oct/06 
  Greece  0.98   0.00  0.00%  -0.04%  -0.18%  -0.46%  Oct/06 
  Italy  0.78   0.02  -0.02%  -0.06%  -0.34%  -0.17%  Oct/06 
  Mexico  5.87   0.01  -0.01%  0.03%  0.11%  -0.92%  Oct/06 
  New Zealand  0.53   0.01  -0.01%  0.05%  -0.12%  -0.49%  Oct/06 
  Brazil  7.54   0.19  0.19%  -0.09%  0.68%  0.52%  Oct/06 
  Spain  0.24   0.05  0.05%  0.09%  -0.05%  0.09%  Oct/06 
  Portugal  0.25   0.00  0.00%  0.01%  -0.12%  0.11%  Oct/06 
  Canada  0.57   0.06  -0.06%  0.03%  0.01%  -0.73%  Oct/06 
  Australia  0.85   0.03  -0.03%  0.01%  -0.11%  -0.03%  Oct/06