The temporary ceasefire may be extended, but the Straight of Hormuz remains closed, and the risk of an inflation breakout and recession is rising.
Goldman Sachs’ chief Australia economist, Andrew Boak, is predicting inflation will hit 3.9% this year, up from 3%. Boak expects two cash rate hikes in 2026 amid a worsening growth outlook. He now estimates a 25% chance of a recession in the next year, double his previous estimate.
Meanwhile, NAB has announced it is strengthening its balance sheet and taking extra provisions to ‘better reflect the risks inherent in its business’. The bank’s base case is that reasonable growth and unemployment are maintained, but treading a fine line between positive and negative economic scenarios, with the downside increasing by 2.5% to 45%.
Over the last three months, the market has increasingly viewed current interest rates as insufficient to bring inflation back to the 2-3% RBA target range. The 3-month BBSW graph below shows it moving from 3.73% in January to 4.33% as at 20 April 2026.
3-Month BBSW
Source: Trading Economics
This week, we publish three wide-ranging views on how the Middle East conflict will influence markets.
The lead article is from Principal Asset Management and covers investment implications for four fixed income sub sectors, including investment grade, high yield, securitised and private credit. There are a couple of fantastic charts. One shows historical spread ranges, averages, and current spreads, which helps us understand relative value. The other is forward looking and shows underweight, neutral, and overweight sub sector positions.
The popular global asset allocation view from Australia is back from Thomas Poullaouec from T. Rowe Price. This is a short, sharp overview and great for a quick catch-up.
Daleep Singh and Guillermo Felices from PGIM say there are no good options left for the Middle East conflict and present their adverse and less adverse war scenarios. They assign a 40% chance the US economy will overheat in the next 12 months as a base case. This article covers all the major markets.
Enormous, global inflows are changing the ETF market. State Street has released a new paper highlighting issues for the sector.
Finally, we have a paper from Phil Strano explaining the growing domestic issues for private credit.
Here’s the latest on domestic corporate bond issuance:
- Agence France Locale has launched a 10-year benchmark Kangaroo with an indicative 5.9% coupon or 118 basis points over semi quarterly swap
- APA Infrastructure is taking indications of interest (IOI) in a potential multi-tranche deal:
- 30-year non-call 7.5-year fixed to floating and or floating with price guidance of 230 basis points over swap
- A 10-year fixed rate tranche with price guidance of 170-175 basis points over semi quarterly swap
- Bendigo and Adelaide Bank has raised $750m in a three-year senior unsecured floating deal with a coupon of 81 basis points over swap
- Community First Bank has raised $50m in a senior unsecured three-year floating rate note at 130 basis points over 3m BBSW
- Newcastle Greater Mutual Group has priced a $100m February 2029 tap, with a coupon of 3m BBSW + 185 basis points at 105 basis points over 3m BBSW
- Pacific Life has raised $850m in a five-year, dual tranche deal:
- $300m in a fixed rate tranche with a 5.692% coupon
- $550m in a floating rate tranche at 105 basis points over 3m BBSW
- Powerco has raised $350m in a 10-year, fixed rate, senior secured green bond with a 6.425% coupon
- Scentre has priced a six-year senior fixed rate unsecured bond deal with a 5.85% coupon
- Stockland has priced a seven-and-a-half-year, senior unsecured fixed rate bond deal at 6.12% or 137 basis points over semi quarterly swap
- The Mutual Bank has priced a $30m senior unsecured three-year floating rate note at 3m BBSW + 140 basis points
- West Connex has raised $1.21 billion in a fixed rate senior secured dual-tranche deal:
- Six year with a 5.944% coupon
- 10 year with a 6.413% coupon.
Have a great week!
