Australian Bond Exchange Weekly Newsletter
30 September 2022
“Part of paying the price is the willingness to do whatever it takes to get the job done.” – Jack Canfield
- Optus hacked
- British treasury bonds drop
- US Fed keeps raising rates
Optus reported a cyber-attack that resulted in a data breach of up to 9.8 million of their customer records. This is the largest data breach in Australian history. There is a risk that this information may be used to commit identity theft and fraud. We will be extra vigilant in verifying and managing your personal information, but if you suspect your details are compromised, then please contact us and follow these steps.
Australian retail sales posted another gain for August with recent interest rates still having little impact on the all-important consumer. Whilst gains have slowed a touch since the RBA has begun increasing cash rates in May, they are clearly still way too strong which highlights the need for further increases in interest rates.
The RBA released a white paper on digitisation of assets that can be traded and exchanged directly and in real-time on digital platforms. We think this is the future of finance and we’ll be interested in being directly involved.
The Albanese labor government is proposing to retrospectively stop companies from paying shareholders fully franked dividends in specific cases. This major change will be a tough sell to get the legislation passed. This however is a major concern for retail investors and superannuation funds which heavily rely on franking credits to boost their incomes from their investments.
The UK Pound dropped, and the Bank of England is stepping in to buy long-dated government bonds to “… restore orderly market conditions”. The market responded by having the worst day since the 1990s. This highlights how fragile the financial markets have become and of course the necessity for governments and central banks to coordinate their efforts in order to achieve lower inflation.
As expected, the US Fed made its third straight 0.75% increase in a row, bringing the Fed rate to 3% – 3.25%. Mr Powell has reminded the world that they will keep increasing rates until inflation is back under control. This tough talk has shaken investor confidence and the US equity market has fallen more than 8% for the month of September.
In September, the German inflation rate increased to a multi-decade high of 10% highlighting the major issues the largest economy in Europe is facing. The shocking news comes after major economic institutions predicted that the economy will contract next year. The high cost of energy was the leading factor for the spike in inflation and the German Chancellor Olaf Scholz announced on Thursday plans for an energy relief package worth up to Euro200 billion.
Current Investment Opportunities
Right now, with inflation steadily rising, you can’t get a better investment than Sydney Airport CPI linked. This bond is matched to inflation and will pay you whatever the CPI, plus 3.12%.
We also have a new issue that’s coming up. Contact us to find out more details.
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