Investing

Bond Markets: The month that was. July 2017

  • 01.AUG.2017
  • Ian Martin, CIO,  XTB

Despite a volatile month, bond indices produced a positive return for July.

The RBA introduced the concept of a neutral cash rate at 3.5% then told the market to ignore it. They then stated that they may not be in step with other central banks who are looking to raise rates.

Headline CPI printed below expectations at 1.9% (YOY).

Chart 1: AusBond Composite Index Performance 

Chart 2: Composite, Treasury and Credit Index Returns 

 

INDEX As at 31 JUL 17 1 MONTH
Composite Bond Index All Maturities 0.25%
Treasury Index All Maturities 0.11%
Credit Index All Maturities 0.55%

Further breakdown of the sectors of the markets indicates where the best returns were.

Chart 3: Index Performance by Maturity Sectors

MATURITIES COMPOSITE BOND INDEX TREASURY INDEX CREDIT INDEX
0-3 Years 0.26% 0.22% 0.38%
3-5 Years 0.41% 0.29% 0.66%
5-7 Years 0.35% 0.22% 0.73%
7-10 Years 0.22% 0.03% 0.70%
  • Credit Indices (corporate bonds) outperformed the Treasury Index (Government Bonds).
  • The 5-7 year Credit Indices performed best, with a 0.73% return.
  • Longer dated government bonds 7-10 years had a small positive return of 0.03%.

Year to Date Returns

MATURITIES COMPOSITE BOND INDEX TREASURY INDEX CREDIT INDEX
All Maturities 2.51%  2.41%  3.40%
0-3 Years 1.56%  1.27%  2.33%
3-5 Years 2.31% 1.69% 3.77%
5-7 Years 2.66% 2.11% 4.62%
7-10 Years 2.93% 2.52% 4.73%

Year to date, the indices have produced positive returns (Composite Index 2.51% and Credit index 3.40%).

This positive return 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

  • 25Nov 2017

    YTMSG1: STOCKLAND 8.25% 25 NOV 2020

    This is the coupon date

  • 29Nov 2017

    YTMDOW: DOWNER GROUP 5.75% 29 NOV 2018

    This is the coupon date

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