With the financial year coming to an end, our Australian fixed income, global credit and cash teams each highlight interesting moves in their asset class over the quarter.

Global bond yields under pressure since late 2018

Yields fall to record lows, turning negative in Europe and Japan

10-year government bond yields are shown.  Source: Bloomberg, 1 July 2018 to 30 June 2019.


  • Bond yields fell to record lows in most markets in the June quarter, resulting in pleasing returns from global bond markets
  • This reflected anticipation of rate cuts and/or further Quantitative Easing to support economic activity levels


Australian government bond yields also fall sharply

Domestic yields closed the year at all-time record lows

10-year CGS yield is shown.  Source: Bloomberg, 1 July 2018 to 30 June 2019.


  • Bond yields continued to head sharply lower in the June quarter, deteriorating to all-time record lows
  • Australian bonds returned ~10% in FY19
  • In June, the RBA responded to low inflation and the weakening outlook for growth by cutting interest rates, to 1.25%
  • Most investors expect further rate cuts in Australia in the remainder of 2019


A period of volatility for Global Credit

Sentiment largely influenced by the US/China trade dispute

Investment Grade = Bloomberg Barclays Global Aggregate Corporate Index; High Yield = Bank of America Merrill Lynch Global High Yield Index (BB-B). Source: Bloomberg, 1 July 2018 to 30 June 2019.


  • Volatility returned to credit markets as trade talks deteriorated
  • Lower trade volumes were seen as a potential drag on global growth and, in turn, corporate profitability
  • Geopolitical uncertainty in Europe (Brexit, Italy) hampered sentiment towards European names
  • Markets calmed in June, though sentiment remained fragile


Australian cash rate forecasts have nosedived recently

Source: Bloomberg, 31 March 2019 to 30 June 2019.


  • In March, money markets suggested Australian interest would finish 2019 at 1.11% – effectively pricing in at least one, or possibly two 25bps cuts to the official cash rate of 1.50% at the time
  • These forecasts have since been reduced, reflecting moderating economic conditions and verbal indications from policy makers
  • By the end of June, a cash rate of 0.77% had been priced in by the end of this year…
  • … that suggests investors are currently anticipating one further 25bps rate cut from the Reserve Bank of Australia within the next six months, following moves already made in June and July
  • Forecasts suggest borrowing costs could fall even lower still next year – a terminal cash rate of 0.65% has been priced in for this cycle
  • The performance of Cash funds will be driven, in part, by changes in official interest rates

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