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 property. But it is not all gloom and doom. Global banks and some commodity companies’ equity prices have jumped. Somewhere in between the losers and the winners is Spectrum’s core investments – floating rate corporate bonds (FRNs). These have held steady in price while producing income. More importantly, if fixed rate bond yields are beginning their long road back towards historical norms, investors may want to consider tilting their portfolio more towards FRNs.