Credit updates:

  • Retail corporate bonds have continued to be in demand highlighting their relative immunity to global equity market fluctuations.
  • Primary issuance of corporate bonds remains light, adding to the natural bid for bonds in the secondary market.
  • NextDC have launched a new 3.9yr bond paying around the 6% area (subject to demand). NextDC has been an active issuer in the unrated bond market and have developed a loyal investor base so we expect this deal to be well subscribed. It’s worth highlighting that we have been active in the June-2021(2.9yr) bonds which still offer attractive yields of 5.4% for a year shorter maturity than the new deal.

Macro comment:

The following factors were impacting bond pricing this week:

  • Benchmark US 10yr treasury yields are 5bp lower than a week ago at 2.83% as money has rotated from risky equity markets in the safety of fixed income
  • In Australia short term funding pressures for banks have eased which has seen buying come back into shorter dated bonds in the wholesale market. However domestic lenders look increasingly likely to raise lending rates, 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:

With the start of the new financial new year ASIC has come out with some startling statistics on self-managed superfunds (SMSFs). With more onerous on diversification and transparency in people’s investments and with their best interest in mind regarding managed fees as well as inflation.

Switching out of term deposits into direct bonds is a safe way to maintain your fixed income allocation while getting higher yields to overcome inflation. Have a portion of your portfolio include inflation linked funds to hedge against inflation pressures. Call your ABX representative on +61 2 8076 9343 to secure your bonds today.

Focus on AUD:

Yesterday the RBA interest rate decision came out as expected at 1.5% with the statement noting that “the Australian dollar has depreciated a little” though the reference to “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation” was dropped suggesting the RBA is happy with the recent drop and less concerned with upside risks for the $A.

The Aussie was unmoved by the RBA statement but found selling pressure overnight to tag a 14 month low Of 0.7310. It has recovered some market position after some risk appetite saw the USD take a breather. Today we have Retail Sales and Trade Balance figures. It is expected that if bullish numbers today can’t recapture the key 0.7400 level decisively we will see further downside for the Aussie.

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

Visit our website https://www.bondexchange.com.au/ for more articles.

Follow Us @AusBondExchange

Weekly commentary and direct bond investments ABX weekly 4/07/18

 

ABX weekly market insights

 

Australian Bond Exchange Pty. Ltd. (“ABX”) provides both general and specific financial product advice. This document and any information, advice or recommendation has been provided by ABX without taking account of your objectives, financial situation or needs. Because of this, you should before acting on any information, advice or recommendation from ABX consider the appropriateness of the information, advice or recommendation, having regard to your objectives, financial situation and needs. If this document, or any information, advice or recommendation, relates to the acquisition, or possible acquisition, of a particular financial product, you should obtain a product disclosure document relating to the product and consider the document before making any decision about whether to acquire the product. ABX, its directors, representatives, employees or related parties may have an interest in any companies or entities, or any financial product issued by companies and entities, and may earn revenue from the sale or purchase of any financial product, referred to in this document or in any information, advice or recommendation. Neither ABX, nor any of its directors, representatives, employees, or agents, make any representation or warranty as to the reliability, accuracy, or completeness, of this document or any information, advice or recommendation. Nor do they accept any liability or responsibility arising in any way (including negligence) for errors in, or omissions from, this document or any information, advice or recommendation. Any reference to credit ratings of companies, entities or financial products must only be relied upon by a “wholesale client” as that term is defined in the Corporations Act 2001 (Cth). ABX strongly recommends that you seek independent accounting, financial, taxation, and legal advice, tailored to your specific objectives, financial situation or needs, prior to making any investment decision. ABX does not make a market in the securities or products that may be referred to in this document.