We’ve been watching long term developed market sovereign rates for some weeks now. They continue to reach new highs due to a number of factors including:
- High fiscal spending, growing sovereign debt piles. US debt to GDP is now a high 6%
- Persistent inflation
- The ongoing war in the Middle East keeping fuel prices elevated
- AI hyperscalers issuing long term debt in size, consuming capital and taking liquidity out of the market.
As of close of business yesterday, the Australian 10-year government bond rate was 5.189% and the 30-year 5.72%. The US 10-year isn’t far behind at 4.805% and the 30-year at 5.28%.
Chris Iggo from BNP Paribas has raised the possibility of a 6% US 30-year sovereign yield. I can’t imagine what it would do to equity and other investment markets.
Real yields for both Australia and the US government bonds, that is the yield less inflation is sitting at attractive rates, not seen for more than 15 years according to the Betashares 2Q investment report.
The world’s largest ETF provider, Vanguard, launched a new floating rate ETF this week.
There’s little data available on private markets, so I am pleased to publish FinCap’s report into the domestic private credit and equity markets.
Emma Lawson from Janus Henderson is back with her popular monthly Australian Economic View.
In other Australian corporate bond market news:
- Australian Rail Track Corp has launched a seven- and/or 10-year senior unsecured fixed-rate bond with price guidance of 120-125 basis points over semi quarterly swap and 135-140 basis points over semi quarterly swap, respectively
- Coles raised $500m in an eight-year senior unsecured fixed rate deal with a 6.198% issue yield
- Electranet has priced a $400m senior secured seven-year fixed rate bond with a 6.208% issue yield
- Great Southern Bank has launched a five-year senior unsecured floating rate note with price guidance of 130 basis points over 3-month BBSW
- The Lottery Corp is taking indications of interest for a senior unsecured deal for six years and/or 10 with price guidance of 155-160 basis points over semi quarterly swap and 185-190 basis points over semi quarterly swap
Hope you’re having a great week!
