The RBA Monetary Policy Board unanimously decided to raise the cash rate yesterday by 25 basis points to 3.85%. History tells us that a single hike is most unlikely, but will it be one, two, or even more to come?
Growth in private demand, a tight labor market and a wide range of other data contributed to the decision. Given the Board’s recent past, I think they’ll be conservative in terms of raising rates and will want to wait and see what happens before contemplating raising again. I’m not an economist, but I think there will be at least one more hike. Adam Bowe from PIMCO gives his take on the move.
The global bond market continues to break records. According to Bloomberg, global bond sales reached US$1 trillion in record time this year as borrowers took advantage of soaring demand and cheap costs. The biggest issue was AI-related from Oracle Corp., who raised US$25 billion.
Speaking of records, ETF global assets under management have reached US$20 trillion, more than doubling since the end of 2022, and increased by US$5 trillion last year alone. Blackrock has the biggest ETF range and recently unveiled Europe’s first actively managed ETF that will invest in AT1 bonds.
We have a report from Marsha Lee of Calastone on Australian managed funds and reports that ‘Fixed income was clearly the anchor allocation…’ in 2025. I read a very interesting note from Vanguard this week about considering flipping the 60/40 equity/bond allocation. It’s behind a paywall but if you can access the article, it’s worth a read.
The University of NSW published a Commonwealth guide to blue bond issuance, that is bonds where funds are used for marine and ocean-based projects such as marine protection, sustainable fisheries, or coastal resilience against recognised standards.
Seema Shah from Principal Asset Management reviews the US Fed decision to keep rates on hold and her expectations for future easing.
In the last week, we’ve seen the following corporate action:
- Westpac is taking indications of interest (IOI) for a senior and/or Tier 2, 15-year, non-call 10 deal with price guidance of 75 basis points over swap and 145 basis points over semi-quarterly swap, respectively
- ING is taking IOI for a senior unsecured deal, across multiple tranches with a 2.75-year and /or five-year, fixed and/ or floating. Price guidance is 70 basis points over swap and 83 basis points over swap
- Aroundtown priced a dual tranche $600 million kangaroo deal:
- $300m in a five-year fixed-rate tranche with a 6% coupon
- $300m in a 10-year fixed-rate tranche with a 6.65% coupon
- AusNet priced a $1.1 billion 30NC10 hybrid in a dual tranche deal:
- A $450m floating rate tranche priced at 177 basis points over 3-month BBSW
- A $650m fixed-to-floating rate tranche with a 6.49% coupon.
Have a great week!
