Investing

Bond Market: The month that was. August 2017

  • 04.SEP.2017
  • Ian Martin, CIO,  XTB

Northern hemisphere summer months often produce surprises. In the USA the market focused on:

  • strong payrolls
  • weak inflation
  • sabre rattling between the USA and North Korea
  • the natural disaster of hurricane Harvey.

 

In Australia most of the focus was on the rising AUD, while employment data showed an increase of 27.9k. The month also ended on a strong note with total construction work up 9.3% QoQ.

The Bloomberg AusBond Composite Index for all maturities (the common benchmark) produced a small negative return of 0.01%. The Treasury Index for all maturities which is the single largest contributor to the Composite Index produced a negative 0.06% return. Credit was able to produce a positive 0.18% return. 

Chart 1: Composite, Treasury and Credit Index Returns 

 

INDEX As at 31 AUG 17 1 MONTH
Composite Bond Index All Maturities -0.01%
Treasury Index All Maturities -0.06%
Credit Index All Maturities 0.18%

It is worth looking into sectors of the markets to see where the best returns were found.

Chart 2: Index Performance by Maturity Sectors

Credit provided the best returns.

MATURITIES COMPOSITE BOND INDEX TREASURY INDEX CREDIT INDEX
0-3 Years 0.06% 0.01% 0.16%
3-5 Years -0.05% -0.10% 0.11%
5-7 Years -0.05% -0.10% 0.18%
7-10 Years -0.01% -0.05% 0.30%
  • Credit Indices (corporate bonds) outperformed the Treasury Index (Government Bonds).
  • The Credit Indices 7 -10 year bonds were at the top of the table with a 0.30% return.
  • 0-3 year Government Bonds had a small positive return of 0.01%.

Year to Date Returns

MATURITIES COMPOSITE BOND INDEX TREASURY INDEX CREDIT INDEX
All Maturities 2.50% 2.35% 3.58%
0-3 Years 1.62% 1.28% 2.49%
3-5 Years 2.25% 1.60% 3.89%
5-7 Years 2.61% 2.00% 4.81%
7-10 Years 2.92% 2.46% 5.04%

Year to date the indices have produced positive returns (Composite Index 2.50% and Credit index 3.58%). This is despite the fact that outside of Australia some central banks have been moving away from a monetary accommodative stance.

Source: Bloomberg & Australian Corporate Bond Company

Events

  • 23Nov 2017

    YTMCTX: CALTEX 7.25% 23 NOV 2018

    This is the coupon date

  • 25Nov 2017

    YTMSG1: STOCKLAND 8.25% 25 NOV 2020

    This is the coupon date

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