Australian Bond Exchange Weekly Update
22nd August 2025
Key Points
- Australia: The RBA lowered the cash rate by 0.25% to 3.60%. Headline inflation stayed at 2.1% in June.
- United States: The Federal Reserve left rates unchanged at 4.25%–4.50%. Inflation held at 2.7% YoY in July.
- United Kingdom: The Bank of England cut its Bank Rate by 0.25% to 4.00%. July inflation rose to 3.8% YoY, up from 3.6% in June.
- Eurozone: The ECB kept its deposit rate at 2.0%. Inflation in June edged up to 2.0%, from 1.9% in May.
Market Insights
- Consumer confidence in Australia lifts to its highest level since 2022.
- UK inflation climbs further above target, reaching 3.8%.
- US housing starts rebound, but permits signal caution.
Australia: Confidence at a Two-Year High
Consumer sentiment rose 5.7% in August to 98.5 on the Westpac–Melbourne Institute Index, the highest level since February 2022.
The rebound in confidence followed the RBA’s third interest rate cut of the year, alongside gains in equity markets and housing values. The combined effect appears to have supported household outlooks despite ongoing economic headwinds.
Confidence gains were broad-based, with renters showing the sharpest improvement. This suggests that easing cost-of-living pressures are beginning to filter through across different segments of the population, not just among homeowners. The result highlights the sensitivity of sentiment to both monetary policy moves and broader financial conditions.
United Kingdom: CPI Rises to 3.8%
The UK’s Consumer Prices Index (CPI) increased 3.8% in the year to July, compared with 3.6% in June, according to the Office for National Statistics (ONS). The rise was mainly attributed to higher air fares and food prices.
This is the highest annual inflation rate since January 2024 and remains above the BoE’s long-term target of 2%. While inflation has moderated significantly from its 2022 peak, the recent increase highlights that pressures remain uneven across categories.
The latest ONS data has led some analysts to suggest the Bank of England may adjust the pace of future interest rate changes, though the overall policy stance remains focused on balancing inflation control with supporting growth.
United States: Housing Starts Rebound
Housing activity in the United States showed mixed signals in July. Housing starts rose 5.2% to a seasonally adjusted annual rate of 1.43 million units, marking the strongest pace in five months.
Growth was driven by an 11.6% jump in multifamily construction, while single-family starts also gained 2.8% to 939,000 units. On a year-on-year basis, total starts rose 12.9%, with single-family up 7.8%.
However, building permits — a forward-looking indicator of supply — fell 2.8% to 1.35 million, the lowest level in four years. Multifamily permits declined nearly 10%, reflecting ongoing caution from developers about future demand. The divergence between starts and permits suggests near-term strength but possible softening ahead if permitting activity continues to weaken.
We’re pleased to announce that the fixed rate note from Magnetic rail has now been admitted to trading status on ABE
Contact your ABE adviser now to take advantage of this opportunity today
Investment Overview:
- Product: Magnetic Rail Group Pty Ltd
- Type: Fixed Rate Note
- Coupon: 9.25 % p.a. Paid Semi-Annually
- Maturity Date: 24 May 2030
- Currency: AUD
- Minimum Investment for Wholesale: $50,000 AUD
- Eligibility: Wholesale Investors Only
Overview
- MRG has undertaken a A$175M notes issuance to refinance its existing HoldCo Loan Notes.
- The new financing is in the form of a 5 Year, A$ Medium Term Note (“MTN”) and will be secured over all the assets of MRG, including the shares in One Rail Australia Holdings Ltd (“ORA”).
- ORA is the 100% owner of the entities which in aggregate form the One Rail Australia business, and the subject of separate secured financing.
Magnetic Rail Group – Company Overview
Magnetic Rail Group (MRG) is a 50:50 joint venture between PT Asian Bulk Logistics and M Infrastructure Group Trust, established in 2022 to acquire and operate the coal haulage business of One Rail Australia (ORA).
Through its key operating subsidiary ORA, MRG is one of Australia’s leading coal haulage operators, with ~30% market share in the Hunter Valley (NSW) and a growing presence in the Bowen Basin (QLD). The business transports metallurgical and thermal coal to export terminals under long-term, take-or-pay contracts with blue-chip counterparties.
The cornerstone of this contracted revenue base is an exclusive agreement with Glencore plc (Moody’s Baa1 / S&P BBB+) through 2036, covering almost all of Glencore’s Hunter Valley coal production. Other key customers include Yancoal and Stanmore.
Operating Subsidiary – One Rail Australia (ORA)
ORA operates a modern fleet of 51 locomotives and 1,468 wagons, with an average age of ~10 years and a book value of ~$420m. The company has invested significantly in rolling stock and maintenance facilities, supporting reliable and efficient operations.
Looking ahead, ORA is expanding further in Queensland with three new locomotives and ~130 wagons set to enter service in 2025 under a haulage agreement with Stanmore. This strengthens its growing Bowen Basin presence while reinforcing contracted volumes.
Financially, ORA generates stable, predictable cashflows: ~99% of haulage volumes are under take-or-pay agreements, supporting forecast net operating cash flow of ~AUD 100m in 2025 against ~AUD 50m interest expense.
Risks to Consider
📘 Example: How Fixed Income Works
A company issues a debt security with the following terms:
- Term: 5 years
- Coupon: 5.15% p.a., paid semi-annually
- Issue Price: $100
- Minimum Investment: $10,000 AUD
Investor Scenario – Semi-Annual Payments:
Sarah may choose to receive income every 6 months. She receives $2,575 every 6 months (5.15% × $100,000 / 2). Over 5 years, she receives $25,750 in total income, plus her $100,000 principal at maturity (subject to no credit event or early redemption).
If she sells before maturity, she may receive more or less than $100,000 depending on market conditions.
*Data accurate as at 22.08.2025
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