Australian Bond Exchange Weekly Update
12 Jun 2026
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Market Insights
- Stronger-Than-Expected Wage Decision Adds to Inflation Risks
- U.S. Inflation Accelerated in May and Labour Market Remains Strong
- The Canadian Economy Is Struggling
Key Points:
- Australia: The RBA increased cash rates by 0.25% to 4.35% p.a. at its May meeting. April CPI eased to 4.20% p.a., while Trimmed Mean rose to 3.40% p.a.
- United States: The Federal Reserve left the federal funds rate unchanged at 3.50%–3.75% p.a. at its April 2026 meeting. The latest U.S. CPI inflation rate is at 4.2% p.a. as of May 2026. Core CPI was more contained at 2.9% p.a.
- United Kingdom: The Bank of England held Bank Rate steady at 3.75% p.a., and CPI for April was 2.8% p.a., with Core CPI slowing to 2.5% p.a.
- Eurozone: The European Central Bank increased its key deposit facility rate by 0.25% to 2.25% p.a., and recent data show inflation in the euro area increased to 3.2% p.a. in May, up from 3.0% in April.
| Region | Policy Rate | Latest Inflation (YoY) |
|---|---|---|
| Australia | RBA Cash Rate 4.35% p.a. | 4.2% p.a. to April 2026 |
| United States | Fed Funds 3.50–3.75% p.a. | 4.2% p.a. to April 2026 |
| United Kingdom | Bank Rate: 3.75% p.a. | 2.8% p.a. to April 2026 |
| Eurozone | Deposit Facility Rate: 2.25% p.a. | 3.2% p.a. in April 2026 |
Stronger-Than-Expected Wage Decision Adds to Inflation Risks
The Fair Work Commission awarded a 4.75% increase to minimum and award wages, at the upper end of expectations. When combined with the phased removal of the C13 award level and earlier changes to junior pay rates, the total increase in award wages is estimated at around 5.2%. The decision is expected to support stronger wage growth, with forecasts for FY27 revised up to 3.6%, above the Reserve Bank of Australia’s 3.2% forecast. While a gradual easing in the labour market should moderate wage growth outside the award system, there is a risk that businesses continue to pass higher labour costs on to consumers, particularly in capacity-constrained sectors. The stronger wage outcome reinforces concerns about second-round inflation effects and supports expectations that the RBA may need to keep policy tighter for longer.
U.S. Inflation Accelerated in May
U.S. inflation accelerated in May 2026, with headline inflation rising to 4.2% YoY (up from 3.8% in April) and 0.5% for the month. However, core inflation (which excludes food and energy) remained relatively moderate at 2.9% YoY, suggesting that the increase was not broadly spread across the economy. The main driver was a surge in energy prices, particularly gasoline, caused by disruptions in oil markets linked to the U.S.–Iran conflict. The next official CPI release (for June 2026 data) is scheduled for July 14, 2026.
U.S. Labour Market Remains Strong
Recent U.S. labour market data indicate that economic activity remains strong and the job market remains tight. Jobless claims are still very low, suggesting unemployment could fall toward 4%, while inflation remains elevated. Non-farm payrolls increased by 172,000 in May, comfortably exceeding expectations and matching the strong pace of recent months after upward revisions. The combination of robust employment growth, low unemployment, falling real interest rates, and persistent inflation points to continued economic momentum but also ongoing capacity constraints.
These conditions are contributing to higher long-term bond yields and reducing the likelihood of near-term interest rate cuts. While a strong labor market and persistent inflation increase the risk that the Federal Reserve may need to tighten policy further, the relatively moderate core inflation readings suggest policymakers are likely to wait for additional evidence that inflation pressures are becoming more broad-based before considering a new rate-hiking cycle.
The Canadian economy is struggling
The Canadian economy is struggling to generate momentum. Real gross domestic product fell by 0.1% on an annualized basis during the first three months of the year. That follows a 1% contraction in the fourth quarter, a downward revision from a previously reported 0.6% decrease. Weak business investment, slowing growth, and rising economic slack point to a much softer outlook. This is particularly striking given Canada’s close economic ties to the United States. Historically, a strong U.S. economy has provided a significant tailwind for Canadian growth, but that relationship appears weaker today. wait for additional evidence that inflation pressures are becoming more broad-based before considering a new rate-hiking cycle.
9.25% Magnetic Rail 2030 – Secondary Market Trading Flow Available!
Magnetic Rail Group Fixed Rate Note — 9.25% p.a., paid semi-annually to May 2030 — is now available to both retail and wholesale investors on ABE.
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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 |
| Min. Investment: | $50,000 AUD |
| Eligibility: | Retail and Wholesale Investors |
Overview
- Magnetic Rail Group (MRG) owns 100% of One Rail Australia Holdings Ltd (ORA), a leading rail haulage that has undertaken an A$175M notes issuance to refinance its existing Loan Notes.
- The new financing is in the form of a 5-Year, A$ Medium Term Note (“MTN”) and will be secured over all the assets of MRG, including its shares in One Rail Australia Holdings Ltd (“ORA”).
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.
Example: How Fixed Income Works
A company issues a debt security with the following terms:
- Term: 5 years
- Coupon: 7.9% 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 $3,950.00 every 6 months (7.90% × $100,000 / 2). Over 5 years, she receives $39,500.00 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.
Risks to Consider
- Interest – Movements in interest rates may impact returns and the value of the Notes.
- Issuer Risk- Return depends on the issuer’s financial stability.
- Liquidity Risk- These products may not be tradable or redeemable early.
- Complexity- May not suit all investors. Professional advice is recommended.
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World Economic Calendar
*Data accurate as at 12.06.2026
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