Interest rates and oil prices have been rising, and inflation appears poised to move higher. Housing and rent increases are crazy and damaging North Queensland floods look set to compound higher food prices. I read this morning that garbage collectors are battling with fuel prices and filling up their tanks, potentially compromising rubbish collection. This wasn’t something I’d considered, but I have been thinking about the crisis taking us back to a pandemic-like environment, where we work from home and go nowhere.
CPI was released this morning and eased slightly to 3.7% to the end of February 2026, from 3.8% in January. The trimmed mean, the RBA Monetary Policy Board’s preferred measure, was steady at 3.3%. However, it’ll be March’s CPI result that will help determine the next cash rate outcome in early May.
The government bond yield curve is flattening as expectations are for further cash rate hikes with the two-year government bond yield priced at 4.65% and 10-year at 4.98%, respectively.
Interestingly, according to Phil Strano of Yarra Capital, as of 20 March, the market was pricing in another 70 basis points of tightening, taking the cash rate to circa 4.8% by the end of 2026. Despite the expected hike, Strano thinks it’s important to maintain duration. There are some excellent graphs in the article, it’s well worth a read.
Thomas Poullaouec, from T. Rowe Price is back with his very popular monthly asset allocation – The View From Australia article.
Nothing is certain, and Arif Husain from T. Rowe Price cautions against relying on traditional assumptions, to look through disruptions and focus on relative value.
There is plenty of evidence for following trends and Mark Richardson and Robert Shimell from Janus Henderson explain what to look for.
Speaking of trends, equities and bonds have begun to correlate once again according to Benoit Anne from MFS Investment Management in his ‘No Place to Hide’ article.
What are investors doing? According to ETF Stream, European investors are withdrawing funds from financial sector ETFs, and US large-cap equity ETFs as well as certain fixed income ETFs, and greater China, India and Mexico equity ETFs.
The US Fed voted last week to hold interest rates, but still forecasts one more cut in 2026, according to Joe Unwin from Apostle Funds Management.
Finally, the Australian Sustainable Finance Institute has released a paper, ‘Australian Taxonomy-aligned Debt Guidance: Issuing use-of-proceeds debt’.
The domestic corporate bond market has been quiet over the last week, with just two issuers in the market:
- Meridian Energy launched a senior unsecured seven-year fixed-rate green kangaroo (issued by a global company in Australian dollars) with price guidance of 155 basis points over semi quarterly swap
- Charter Hall priced a $250m senior unsecured seven-year fixed-rate bond with a 6.273% coupon
Have a great week!
