Bonds, Australian bonds

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For anyone paying attention, one of the H&H’s excellent calls a few months ago was to get long Australian bonds as the RBA’s fantasy of future growth ran into the nasty reality of a housing and China bust. To wit, today we see bond returns jumping:

Damien Boey of Credit Suisse is another bond bull that can take credit. Today he explores how far the trade yet has to run:

In our recent article “Harvesting term risk premia in equities” dated 13 November 2018, we argued that:

  1. European sovereign risk was likely to cause US bond yields to peak, based on our augmented term premium framework.
  2. There was much more room for Australian bonds to rally relative to US bonds, because impaired monetary transmission, and domestic slowdown were likely to push short- and long-term neutral rates lower.
  3. Within the equity market, bond proxies, like A-REITs should outperform.

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