The Federal Budget was delivered last night with many measures already flagged. One key concern has been whether new measures might stimulate the economy at the exact time the RBA Monetary Policy Board is working to dampen activity.
Economist, Emma Lawson from Janus Henderson, is of the view that it doesn’t, just.
The capital gains tax laws may influence fixed income investors, although my understanding is that any higher than anticipated fixed income returns are treated as income and not strictly capital gains, but I’m not a tax lawyer, so please check treatment with your accountant.
The bond market is forward-looking and often the first mover in markets. Matthew Macreadie from IAM assesses the impact of the last three rate hikes on fixed income portfolios and how they are positioning client portfolios given possible further hikes.
Is it time to add duration? Globally, it’s a mixed bag, according to Chris Iggo from BNP Paribas. There’s a couple of lovely charts in this article showing positive, neutral, and negative asset class views.
Carry is still core according to Aviva. That is, investing for a longer term to access higher rates and as time progresses and the term declines, given an upwards sloping yield curve, there’ll be a gain on the price of the bond.
Equities and bonds are still positively correlated, says Benoit Anne, from MFS Investment Management but the correlation is the lowest it’s been since 2020, and diversification benefits remain.
Lastly, we’ve had notification that Perpetual’s Dynamic Fixed Income Fund will close next month as it failed to reach scale.
In Australian corporate bond market news:
- PACCAR has raised $250m in a senior unsecured three-year fixed-rate bond with a 5.4% coupon
- QBE launched an Additional Tier 1 deal with non-call seven years. Price guidance is 265 basis points over 6-month BBSW
- Suncorp launched a Tier 2, 11-year, non-call 6 with price guidance of 165 basis points over 3-month BBSW
- Teachers Mutual Bank has raised $350m in a senior unsecured three-year floating rate note priced at 112 basis points over 3-month BBSW
- Ventia Services is lining up a senior unsecured seven-year fixed-rate deal
- Vonovia SE has mandated a new senior unsecured seven-year fixed-rate benchmark deal
Have a great week.
