Bond ETF’s
Hi MM, Does MM have a view on Bond ETF's given the current interest rate outlook globally (maybe not so much in Australia!). Thanks Tim
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Answer
Hi Tim,
MM is bullish bonds, bearish yields, but we’re conscious that the US credit markets are already pricing in seven rate cuts over the next year. Hence a recession is probably required to see more cuts whereas some stronger economic data, such as Thursdays Retail Sales beat could see these “bets” rapidly reined in.
However, assuming we are correct, the Australian 10-year yields still have plenty of room left on the downside e.g. we are targeting the 3% area compared to current levels closer to 4%. The iShares Core Composite Bond Fund (IAF) is one locally traded ETF that will rally if the Australian bond prices advance but there other ETF’s available on the ASX to position oneself for rising bond prices, the Vanguard Australian Govt. Bond Index ETF (VGR) is another worth considering.
