ABE Weekly 09/09/2020

Market Update  

A wise man once said “Yesterday is history, tomorrow is a mystery, today is a gift that’s why they call it the present”

Well, despite the push back from manyeconomists, the prospect of negative interest rates in Australia is drawing all the closer. Bloomberg reported recently in a survey of 11 economists that 7 are expecting the RBA to boost bond purchases and 3 saw the cash rate dropping to 0.10% from 0.25%. This comes after the news that Australia officially entered into a recession. This was hardly a surprise given the economic landscape since the start of the pandemic. If nothing else this just reinforces the fact that the search for yield will only intensify and the demand for higher yielding bonds will continue to grow!It is worth mentioning, that we have been very active recently in NEXTDC Fixed (6.25%) Jun 2021 bonds which are still yielding just over 5%.

This week Perenti (ASX share code: PRN – mining services) announced it was coming to market for just over $500m via a split bond issue where it will raise A$250m from the Aussie market and around US$300m from the US private placement market with a coupon of 5.5%. Joint lead managers for the issue are NAB and HSBC. As we go to print, it has just been announced that after talking of reducing the deal to A$100m it has since been pulled. At this stage we have no further information as to why but could have something to do with supply and demand.

We have tried to stay away from talking about COVID, but it seems it’s still clearly the key driving force behind markets, namely the US, which in turn is driving the rest of the world. The Dow is swinging either side of the pendulum depending on how quickly we are likely to see a vaccine – but clearly the long-awaited correction in the equity market is gaining momentum.

We have started to see plenty of interest from issuers wanting to use the Bond Exchanges Iress platform, which is gaining more and more traction in the market as it provides both issuers and investors access to diversification and income using. For more information about these issues please contact your advisor or the Bond Exchange directly.