Markets look expensive. Credit spreads are tight. No wonder then that market commentators are opting for quality over yield.
Apparently, major investors are actively reducing their exposure to riskier corporate debt amid concerns that recent market rallies have left little cushion against potential downturns. Asset managers are shifting toward defensive strategies, referring to the limited additional reward for taking on additional risk as credit spreads narrow.
I am excited to announce that we have a new podcast with regular commentator, Chris Iggo, CIO at AXA IM, who manages over €465 billion in fixed income. Iggo explains how he thinks about investing in expensive markets. It was terrific to have a European view, and I’d highly recommend tuning in.
Thomas Poullaouec from T. Rowe Price is back with his popular monthly asset allocation comments. It’s interesting to note he is still positive on bonds.
One of the sub-sectors I like is Residential Mortgage Backed Securities (RMBS), so I was very interested to read Moody’s latest report on the Australian market. It breaks down arrears by location. Positively, delinquencies are declining in most areas.
One question many investors are asking is ‘What happens if US debt becomes unsustainable?’ Haran Karunakaran from Capital Group has written a very interesting article addressing the possible outcomes.
Finally, we have two 4Q25 outlooks from Principal Asset Management and Nuveen.
In Australian corporate bond issue news:
- Ampol is taking indications of interest in a 30-year, non-call 8.25 (30NC8.25) subordinated note deal with price guidance of 225-230bps over 3-month BBSW
- Great Southern Bank has launched a three-year senior unsecured, FRN priced at 120 basis points over semi quarterly swap
- Orix Australia has launched a three-year senior unsecured, FRN priced at 100 basis points over 3-month BBSW
- Region Retail Trust has mandated a six-year senior unsecured fixed-rate bond
- ANU has mandated a five-year senior unsecured fixed-rate bond
- Victoria Power Networks Finance raised $750m in a dual tranche deal:
- A $450m fixed rate tranche with a 4.714% coupon
- A $300m floating rate tranche paying 107bps over 3-month BBSW
- Stockland launched a 10-year senior unsecured deal with price guidance of 150bps over semi quarterly swap
- Australian Military Bank priced a $20 million 10.25NC5.25 at 205bps over 3-month BBSW
- Orix Australia has launched a three-year senior unsecured, FRN priced at 100 basis points over 3-month BBSW
- Weir Group priced a $400m inaugural 5.25-year senior unsecured deal at 165bps over semi quarterly swap.
Have a great week!
