Australian Bond Exchange

ABX Weekly 1 August 2018 Market update

  • Corporate bonds had at typically strong week with optimism in the global economy feeding through to tighter credit spreads across the board.
  • We have long mentioned the tenuous nature of the recent equity performance and how it is based on a handful of tech companies which now make up a large percentage of the US equity indices.
  • Cracks started to appear in the façade this week with Facebook and Twitter both dropping about 20% in a matter of days. Such large moves can often signal the beginning of a period of higher equity volatility.
  • We have seen good buy flows in NXT 2021, SYDAIR 2030, CNIAU 2021 and DDR 2020 FRN and would be happy to buy these lines back from investors looking to raise cash.
  • Dicker Data (DDR) was awarded another distribution contract this week for LG commercial displays, as it continues to be a popular investment in the retail bond market offering 5% p.a yield for Mar 2020 maturity.

Macro comment:

The following factors were impacting bond pricing this week:

  • Benchmark US 10yr treasury yields are basically unchanged at 2.96% as the market awaits further guidance from the FOMC later this week. This lack of volatility in interest rates has helped other riskier assets perform.
  • In Australia the money markets continue to forecast an RBA on hold for more than a year with the cooling housing market putting strains on heavily indebted households.
  • Regionally the Bank of Japan was a focus of the week with a few technical changes to their policy being overshadowed by a stronger commitment to maintain very low interest rates for the long term.

Focus on AUD:

A week later and the AUD/USD is trading at 0.7412 not far from this time a week ago. It has been in a tight range between 0.7370 and 0.7360. Popping up yesterday on much better than expected Building Permit figures which clocked a healthy 6.4% far above the 0% expectations and reversing the previous periods contraction of 3.2%. Markets will be waiting for any news from the newly reopened trade talks with China and the Feds’s monetary policy statement and Interest rate decision due out early tomorrow morning.

ABX Colour:

With the auction clearance rates trending downward the housing market is on shaky grounds. Time to diversify your portfolio into safer investment with a tract record of capital preservation.

Call your ABX representative on +61 2 8076 9343 to discuss out how this will affect your investments.

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Investors are worried on the housing sector, with auction clearance rates on a downward trend.

Find out how to diversify your portfolio risk hereABX weekly flash 01/08/2018


ABX weekly market insights


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