Sectors: Bonds
The RBA caught the market off guard last week, delivering no rate cut when the futures market was pricing in a 96% certainty = they were very wrong.
How do you pick Australian Government Bonds to invest in? For example GSBG27 4.75% at coupon interest rate till 24/4/27 is priced at $103.59 atm or GSBG37 3.75% at coupon interest rate till 21/4/37 is priced at $95.35 atm? Is GSBG37 priced below coupon value because of the very long maturity date?
Local bond yields spiked higher after the RBA left rates on hold yesterday, but half of the gains were surrendered as traders digested Michele Bullock’s commentary.
The local 10s did very little last week as they await this week’s accompanying rhetoric regarding the abovementioned priced-in rate cut. Local credit markets are now pricing in at least three cuts before Christmas, although the possibility of a fourth has been taken off the table for now – one weak economic print, and the doves will start to hope again.
Global bond investors reminded Prime Minister Keir Starmer of a harsh truth of British politics: The market’s verdict can be swift and punishing.
Headline numbers from the June jobs report took pressure off the Fed to cut interest rates later this month, likely leaving the central bank on hold, much to President Trump’s angst.
US consumers are growing tired, inflation-adjusted consumer spending dropped last month by the most since January. Americans also stepped back from the housing market as new-home sales slid by the most in three years.
President Donald Trump’s proposed tariffs in April stirred fears that the era of global US financial dominance was over, and European and Asian money managers would cut back on buying US corporate debt.
Last week, the Bank of Japan unveiled a plan to ease the pace of its reductions in monthly bond purchases, aiming to ensure market stability while maintaining a path of normalisation that includes the possibility of additional rate hikes.
