Global bonds have been selling off this week as strong US data has participants reassessing US rate cut expectations. The US 10-year was up to 4.214% overnight, while our 10-year is at 4.45%.
T. Rowe Price’s fixed income CIO Arif Husain, predicts that the US 10-year Treasury yield may rise to 5% within the next six months, driven by rising inflation expectations and US fiscal spending concerns, according to a Bloombery note.
European investment bank Amundi, disagrees – they are positive on US interest rate risk. We publish its article on opportunities in developed markets, which looks at equities and bonds.
The US election is just around the corner and there’s increasing speculation about the outcome either way or if the parliament is divided.
There are four policy areas that may affect markets according to Tom Porcelli of PGIM Fixed Income:
- Trade and tariffs
- Fiscal policy
- Immigration and labor supply
- Monetary policy effects
Porcelli drills down to the outlook under two potential administrations and divided parliaments.
Usually, a divided government is a negative but with a growing deficit, Anna Dryer of T. Rowe Price thinks there could be a silver lining. Dryer assesses the numbers.
There’s been a couple of interesting new issues this week. I took a look at the new BOQ subordinated debt issue on Monday, which has been completed, raising $250m. Final pricing for the 10.25NC5.25 (10.25 year, non call 5.25 year) issue was a significant 22 basis points tighter than initial price guidance. The article compares the recent Judo Bank and QBE sub debt issues.
There’s no sign of the sub debt train slowing down. Getting a slice of new issues seems like an instant money maker. This morning, Hollard Insurance is in the market for 15NC10 funds. Melbourne Airport is also in the market, mandating an eight year senior secured, fixed rate bond.
Finally, just in case you missed it, here’s our podcast on the Future of Hybrids with Brad Newcombe of Fixed Income Solutions.
Have a good week!
