News and Views

 

  • The worst of both worlds

    13. December 2016. The worst of both worlds Australia’s RBA has its foot on the accelerator while the global bond markets are tapping on the brakes.  Just when Australia’s economy could do with some stimulus it faces some headwinds from abroad.  Rising bond yields internationally are spilling over into our bond markets. This hurts fixed rate bond prices.  It ...
  • Rising bond yields – some losers,some winners and a place to hide

    18. November 2016. Rising bond yields – some losers, some winners and a place to hide Australian bond yields continued their rise post Trump’s U.S Presidential win. This has caused chunky losses for some fixed rate bond holders in Australia. It also puts pressure on local borrowing costs. In turn, mortgage rates may rise denting demand for Australian residential ...
  • Just sitting here at the dock of the bay

    8. November 2016. 7 November 2016 Just sitting here at the dock of the bay. Markets are beset by the slumber that one experiences on a languid summers day. What is there to do? But wait for the election result which has the potential to polarise even more an already polarised political scene. And not only are the politicians at ...
  • Banks profits – Goldilocks

    4. October 2016. Some politicians are bleating Australian bank profits are too high.  Some financial commentators are fretting saying they are heading too low.  At Spectrum we see bank profits from a credit viewpoint as about just right. Often lost in the commentary is perspective.  When benchmarking Australian bank profitability against government bond yields profitability margins have not ...
  • Deposits – time for a re-think?

    6. September 2016. Australians have long liked bank deposits. Those in this $2 trillion market got a simple and safe investment. Today, though, it’s a new world. Soon-to-be enforced bank regulations will mean you cannot break a bank term deposit at will. You will need to give 31 days notice. Even then, you may forgo interest. The regulations ...
  • What a waste of debt

    4. August 2016. Debt can do economic good – that is, if its proceeds are put to productive use such as infrastructure or education. However, Australia’s debt binge since our last recession has gone largely towards rising home valuations. This debt not only has little long term economic benefit, it has made the household and banking sectors less ...
  • AAA lost – no worries today, concerns tomorrow

    11. July 2016. The major credit rating agencies are making noises that Australia’s prized “AAA” rating is on borrowed time. With apologies to Charles Dickens, we see it both as the best of times and the worst of times if Australia were to lose its reputation as one of the world’s safest borrowers. Read the full report here – ...
  • Brexit – keep calm and carry on in A$ corporate bonds

    26. June 2016. Brexit means uncertainty.  Uncertainty on its impact on the UK economy and uncertainty on whether it sets a precedent for others in the EU.  And investment markets do not respond well to spikes in uncertainty.  But what does it mean for Australian corporate credit risk?  Next to nothing.  Earnings and debt levels will barely, if ...
  • The yield hunt just got harder

    14. June 2016. The European Central Bank (ECB) has just started buying corporate bonds in Europe. This has lowered the yields of this target bond group, thereby pushing up bond prices. But what does it mean for A$ corporate bonds? These too will eventually feel the positive price impact of policy intervention and a global scramble for yield. ...
  • Not another China bust story

    1. June 2016. Readers of recent financial media are regularly exposed to China Doomsters assuring us that a China economic crash is just around the corner. We agree that the Chinese economy has too much debt that was built up too quickly. This has promoted excess capacity in its economy causing large levels of (unreported) bad debts at ...