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