Credit updates:
- Corporate bonds have continued to be well supported domestically as lack of supply continues to be a driving issue.
- We have seen good buying interest in the 5-6% yielding bonds which offer a nice pick up to Term Deposits.
- NextDC have announced a new round of investor meetings with the view to launching a new debt issue. There should be good appetite for this name given the performance of the business and their existing bonds in the secondary market. If the NextDC 2021 fixed rate bond cheapen as a result, then they also present value in the 3yr maturity bucket.
Macro comment:
The following factors were impacting bond pricing this week:
- Benchmark US 10yr treasury tields are 6bps lower than a week ago at 2.89% as fears of a US/China trade war intensify and central banks globally have signalled a slightly more dovish tone.
- Expectations of an RBA rate hike continue to be delayed with money markets now expecting the first hike no earlier than 2020
- US Equities are being supported by the volatile technology sector that is trading at or near record highs, helped by hedge funds’ failed attempts to short the sector in the past year.
ABX Colour:
As mentioned in the macro commentary, the rising tension from the US/China trade war has clouded investment markets in uncertainty. With hundreds of billions of dollars’ worth of tariffs between the two superpowers this could hinder global economic growth, disrupt business supplies and stoke inflation.
Equity markets around the globe have been hit on this uncertainty. Secure your investments in a more stable market and invest in direct bonds locking in your returns. Holding fixed rate bonds to maturity locks in the return you gain on your investment today.
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Weekly commentary on investments and bonds ABX weekly 20/06/18
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