Archives: Insights

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.

Somewhere in between are Spectrum’s core investments – floating rate corporate bonds (FRNs). These have held steady in price while producing income.

Some politicians are bleating Australian bank profits are too high. Some financial commentators are saying they are heading too low. At Spectrum, we see bank profits from a credit viewpoint as about just right.

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.

Australia’s debt binge has gone largely towards rising home valuations. This debt not only has little long-term economic benefit, but it has also made the household and banking sectors less resilient.

The major credit rating agencies are making noises that Australia’s prized “AAA” rating is on borrowed time.

Brexit means uncertainty. And investment markets do not respond well to spikes in uncertainty. But what does it mean for Australian corporate credit risk? Next to nothing.

The 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?

We agree that the Chinese economy has too much debt that was built up too quickly. Does that mean an imminent crash for our largest trading partner? Spectrum does not think so.

An investment portfolio with asset classes, such as bonds and international equity, may deliver similar long-term returns when compared to purely Australian equities- but with a sharp reduction in price risk.