ABX Weekly 13/05/2020

Market Update  

 

The big news was that our PM Scott Morrison announced on Friday the plan of how to reopen the economy in three stages. This should provide us all with a clear roadmap for the next foreseeable future and should provide some positive inspiration which is much need in this very difficult time. There are some glimmer of hope among all the negative news and the recent successful debt offering by our Australian Federal Government is a very strong sign that the markets are open for business again. In particular, the speed and scale with which investors rushed to buy the debt offering for the largest bond offering in Australians’ history has surprised the Australian Office of Financial Management.

 

The corporate bond market was also given a boost by the recent announcement by the RBA that they are willing to lend money to the banks against corporate bonds. This combined with their $50bn spending over the past couple of months in the Government bond market has further helped to tighten up spreads and helped to restore flow in most of the segments of the bond market.

 

We have seen our 10-year Government benchmark yield moving from a low of 0.80% to a recent high of close to 1% with the short-term rates anchored by the RBA at 0.25%.  The A$ also has recovered strongly from its March lows and is back at 0.64 against the US$ with early signs of topping out at these levels.