The RBA Monetary Policy Board kept the cash rate on hold yesterday, as anticipated. Quarterly inflation rose in the September quarter to an annualised 3.2%, higher than the target 2-3%. Listening to Governor Michelle Bullock yesterday, I think the Board views the current 3.6% cash rate as close to neutral. Bullock mentioned that they could pivot either up or down depending on the data.
I’ve been watching a growing corporate hybrid market. These are very interesting securities with both debt and equity-like characteristics, offering high yields and, while perpetual, high probabilities are that the securities are called at the first opportunity. One new issue this year was five times oversubscribed and had more than $7 billion in bids.
Experts are divided on whether it’s a good time to add interest rate risk now by investing in fixed-rate bonds or not. Jay Sivapalan, from Janus Henderson, thinks the spreads on Australian state government bonds are compelling.
Big bucks are being spent on AI, and some of the companies are starting to tap the debt market. Last week, Meta issued one of the largest bond issues of all time.
If you’ve been wondering if investors are starting to shun US Treasuries, given ever-increasing debt, they have not. In fact, US Treasuries have delivered the strongest returns since 2020 according to Bloomberg. Despite many uncertainties around ballooning debt and the US government shutdown, global demand for safe-haven assets has continued, and US government bonds, along with gold, remain key shelters.
Emma Lawson from Janus Henderson is back this week with her excellent monthly summary of the Australian market.
To ESG or not to ESG? We publish findings from Capital Group’s Global ESG 2025 Report. Find out how investors are approaching ESG, their major concerns, and if they have invested or intend to invest with ESG factors in mind.
We have again a new podcast with Ken Orchard from T. Rowe Price, who thinks the trend is your friend.
In Australian corporate bond issue news:
- Westpac is taking indications of interest for a senior and subordinated Tier 2 deal:
- A five-year fixed and or floating senior tranche with price guidance of 80 basis points over 3-month BBSW
- A 20-year bullet, fixed Tier 2 with price guidance of 175 basis points over semi quarterly swap
- Goodman Australia has mandated a six-year senior unsecured fixed-rate deal
Have a great week!
