ABX Weekly 31/07/2019

Market Update  

 

Tempered risk-off sessions this week as equities succumbed to a mixed bag of corporate earnings and continued speculation that trade deal will be finalised between the US and China remains elusive.  All this underpinned by growing no-deal Brexit concerns forcing the British pound lower yet again and a looming FOMC meeting which has the market in a very cautious sentiment. Markets are pricing the Fed to lower official interest rates by 0.25% to 2.25%, though the significant factor is how far is the Fed willing to go. 

 

Today will be a big day in Australia as the second quarter results for Australian CPI will be released this morning. This data point is following the 0% print last quarter with market expecting an improvement of 0.50%. It is a bit too soon to see the effects, (if any) the recent RBA interest rate cuts will have on inflation but a weak number will solidify the RBA’s position. Even the RBA themselves have said that interest rates are less effective at these levels and called out for the government for additional stimulus to prop up the economy.  

 

The fallout from the two interest rate cuts and the global race to the bottom is that yields have steadily declined. All the current bondholders have done extremely well from their bond positions and have outperformed their respective benchmarks while those who have been slower to act have missed out on capturing the time value of money. 

 

Call your adviser today on 02 8076 9343 to lock in more bond yields before they reach the bottom.