Via Bloomie comes Morgan Stanley:
“The RBA is the furthest away from hiking rates amongst any industrialised countries,” Michael Kushma, chief investment officer for global fixed income, said in an interview in Singapore. “That could allow Australian bonds to continue to do well versus US bonds and other Group-of-10 government bonds.”
The RBA is the furthest away from hiking rates amongst any industrialised countries.
“The domestic economy in Australia is not doing well enough,” he said. “The labour market is not doing well enough. Wages are not doing well enough. The housing market is having troubles at the moment now. So the RBA is not going to raise rates.”
…Australian short-term interest rates are below those in the US, he said. “You pick up yield by selling the Australian dollar for the US dollar, you actually earn incremental yield. It’s the cheapest it’s ever been to sell the Australian dollar today.”
It’s the cheapest in a very long time on the ten year bond:
Australian dollar as a funding currency. The mind boggles.
But think about how good this trade is if you think the RBA will be forced to cut as China slows, the terms of trade fall hard and house price falls broaden…
David Llewellyn-Smith is chief strategist at the MB Fund which is currently overweight Australian bonds and international equities that will benefit from a weaker AUD so MS is definitely talking his book. Fund performance is below:
If these themes interest you then contact us below.
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.
