Australian Bond Exchange

ABX Weekly 23/10/2019

Market Update  

 The only major beneficiary of the massive decrease in official interest rates by our RBA seems to be the property market. House prices in the Sydney and Melbourne have lifted strongly again and reports of bidding wars are making headlines again. Consumer confidence on the other hand has gone the other way and in a recent survey it has slumped to a four-year low. This of course if feeding through to the all-important consumer spending which got confirmed by recent profit warnings by leading retailers such as Harvey Norman, JB Hi-Fi and others. Over-leveraged consumers are not willing to depart easily from their cash and clearly the massive decrease in interest rates and tax cuts by the Government has not helped to change people’s mind. 

 Of course, the global daily negative headlines are also not helping. The Brexit saga is going into a new round with British Prime Minister Boris Johnson’s first attempt to get his Brexit deal through Parliament on Saturday failed, and he has been forced to ask the EU for an extension to the Oct. 31 deadline 

 News out of our major trading partner China is also sliding more and more into the negative with recent GDP figures indicating that growth rates are getting sluggish and soon seem to slip under the 6% benchmark. Off course the ongoing trade war is not helping. On the positive side there seems to be some hope that some sort of agreement is possible soon with comments from US President Trump lifting global equities markets for the time being. 

 Our Australian 10y Government bond rates have moved strongly over the past couple of weeks from a low of 0.86% to a high of 1.19%. This move however is probably a short lift as some of our leading economists such as Bill Evans making suggestions that the next move by the RBA could be some sort of QE measure.  The message clearly is that investors need to get used to very low-interest rates for quite some time. 

 Call through to your ABX advisor now to lock in your 5% bonds before interest rates fall further today. 

02 8249 1987