Via the AFR:
The weakness in bond markets that we’ve been warned of for half a decade will finally arrive in 2018 as inflation rises in the US while the global supply of bonds expands.
…Mr Taylor is expecting the range of the ten-year bond rate to increase from 2 to 2.5 per cent to between 2.75 and 3.25 per cent in 2018 with the potential to go even higher in 2019.
Mr Taylor says they’re forecasting an increase in US inflation, which will force the Federal Reserve to hike interest rates in December, which is priced into bond markets, and then lift rates twice in 2018, compared to current market expectations of less than one interest rate hike.
The Australian bond market was “pretty attractive” to overseas investors starved of yield and quality and would continue to attract inflows so long as yields in major markets such as Japan remain around zero.
…if their view that the Federal Reserve will be hiking rates by more than expected while the Reserve Bank can afford to hold rates at 1.50 per cent while macro prudential measures keep a lid on excesses in the property market, Australian bonds could make further gains.
That’s a good summary, I reckon. The MB Fund’s tactical portfolios are long a spread of local bonds as a part of risk management:
David Llewellyn-Smith is chief strategist at the MB Fund which is currently long international equities that offer superior growth and benefit from a falling AUD so he is definitely talking his book.
Here’s the recent fund performance:
Source: Linear, Factset
The returns above include fees and trading costs on a $500,000 portfolio. Note that individual client performance will vary based on the amount invested, ethical overlays and the date of purchase. The benchmark returns do not include fees. October monthly returns are currently at 4.9% for international and 4.2% for local shares.
If the themes in this post and the fund interest you then register below and we’ll be in touch:
The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. The MB Fund is a partnership with Nucleus Wealth Management, a Corporate Authorised Representative of Integrity Private Wealth Pty Ltd, AFSL 436298.
