Australian Bond Exchange Weekly Newsletter

27 May 2022

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”

Robert Kiyosaki

ABEWeekly 27-05-22

Key Points

  • Labour is celebrating it’s election victory
  • Inflation of food prices continues to be major issue
  • US economy show early signs of slowdown
  • Annual WEF conference in Davos
  • ABE Presents at SIAA and ASA
Australia

Labour is celebrating the win of the Australian federal election. The new PM, Anthony Albanese has already represented our country at the important QUAD meeting in Japan earlier in the week. Labour will face some big issues and has already promised to pour billions of tax dollars into a red-hot economy which is running at full speed with a historic low 3.9% unemployment rate. It will be fascinating to see how the new leaders will respond to the inflationary issues. Eventually they need to be prepared to deal with budget repair as some of the world’s major economies face the risk of stagflation.

Food prices increases continue to grab the headline and this week the market heard from AACO, one of Australia’s cattle giants, to expect sustained price growth for it’s beef. The company recently announced beef price rises of 21% which is a further blow to consumer’s budget.

Real-estate prices are always grabbing the headlines and we heard from top residential developer Mirvac their views on the affordability crisis. Chief Executive Susan Lloyd-Hurwitz warned against narrow measures that boost buyer’s demand. She commented “We are in a genuine national crisis on affordability. Solving it through demand side measures only fuels the fire and they are poor if they are not matched by supply side.” She further pointed out that Australia simply is not building enough homes to cope with the population.

The team had a great time being involved with the Stockbrokers and Investment Advisers Association annual conference in Sydney and the Australian Shareholders Association annual conference in Melbourne. Thanks to everyone that came and had a chat with us. Thanks very much for the organisers for putting on such great events!

Global

The increase in interest rates is starting to work in the US with recent figures of existing home sales falling by 2.4% monthly in April, which is the lowest level since June 2020. Sales slipped for the 3rd straight month and rising mortgage rates are beginning to slow down buyer activity. Clearly the all-important US consumer is starting to feel the impact of higher inflation and higher costs and voices of some sort of global recession next year are growing stronger. In addition, first quarter earnings from numerous US retailers fell short of expectations which is another excellent economic forward-looking indicator.

Supply chain disruption is another major global issue, and we were surprised to read that there is a shortage of baby infant formula in the US! President Joe Biden authorised the use of Air Force planes to urgently transport half a million baby formulas from Europe to relieve this shortage as parents scrambling to find enough to feed their children. The crisis follows the closure of the nation’s largest domestic manufacturing plant in February due to safety issues.

The WEF annual gathering of world leaders in business and politics in the Swiss town of Davos ended last night which was the first time since the Covid pandemic. Some of the key takeaways we have been reading are – Onshoring, renationalisation and regionalisation had become the latest trends for companies and nationalism and protectionism is clearly on the raise. This is in stark contrast to the messages of globalisation over the past 30 years and clearly will challenge us all for a long time to come.

 

We currently have one of the most diversified bond portfolios you can find in Australia: 

 

Goodyear Tire & Rubber 

Our new Goodyear bond is a fixed coupon credit-linked note yielding 4.5% per annum and maturing in March 2027. Full documentation for the offer is available here. 

Xerox 

You can still invest in an Australian dollar fixed coupon credit-linked note over Xerox Holdings Corporation, a 6.5-year note offering a 4.50% per annum fixed rate with coupons paid half-yearly. You can read full documentation here. 

Jaguar Land Rover 

You can still invest in an Australian dollar fixed coupon credit-linked note over Jaguar Land Rover, a senior unsecured 5-year note offering a 4.50% per annum fixed rate with coupons paid half-yearly. You can read full documentation here. 

 

 

Contact us if you have any questions or would like any assistance.

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