Credit updates:

  • Corporate bonds have continued to be well supported domestically as equity markets exhibit increasing volatility, and the safety of bonds as an asset class has become more appealing.
  • Primary issuance of corporate bonds remains light, adding to the natural bid for bonds in the secondary market.
  • NextDC are running investor updates with a view to issue a new 4yr bond. Interestingly we have not seen holders of the 2021 bonds selling, but rather happy to hold. This underlines the stable nature of the NextDC bond curve and attractiveness of the yield it offers.

Macro comment:

The following factors were impacting bond pricing this week:

  • Benchmark US 10yr treasury yields are 1bp lower than a week ago at 2.88% as fears of a US/China trade war remain in investors minds and stock markets begin to turn lower.
  • In Australia short term funding pressures for banks have caused some smaller lenders to increase mortgage rates, further reducing the need of the RBA to hike rate. Increasingly some market commentators are speculating that the next move in official interest rates may be down, not up.

ABX Colour:

A deepening sense of unease is rippling through China’s financial markets. As their stock market tumbles down 20% in the past 5months and 8% in the last 2 weeks. This has overflowed in other stock markets around the globe, all tracking in the red with growing concerns of the start of a bear market. Add in the US/China trade war mentioned last week the market is firmly trading with risk off.

Equity markets could continue this tough track as people flow into the security of fixed income assets. 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.

Call your ABX representative on +61 2 8076 9343 or visit our website https://www.bondexchange.com.au/ to find out more.

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Weekly commentary and direct bond investments ABX weekly 27/06/18

 

ABX weekly market insights

 

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