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Credit Monthly

Domestic credit remained strong to start the year, particularly in subordinated financials. Street inventories remain low—supporting tighter spreads.

The ASX-listed debt and hybrid universe delivered a modest gain of 0.20% through November, underperforming the AusBond Credit Index.

Markets fared reasonably well across the board over October, despite a poor closing week.

September was a strong month for credit markets, with most major indices regaining the losses they suffered through August.

August was a relatively soft month for credit markets, as the rebound from March lows either slowed to marginal gains or retraced.

Markets fared positively through July with all major indices finishing the month higher, albeit moderately.

June was a broadly positive month for the markets, with all major indices posting gains, though these were more modest relative to recent months.

The improvements in markets seen in April continued through May, as all major market indices finished the month in the black.

Australian markets experienced a relatively strong rebound through April as investors were buoyed by the improving messaging surrounding the domestic COVID-19 health crisis.

After what felt like an awful end to February, relief to markets from large global stimulus was short-lived.

The domestic equity market suffered a horror end to the month of February, as concerns for the global impact of the coronavirus escalated.

Markets closed stronger in January, largely retracing losses seen late in 2019, with the ASX recovering from the 237bps decline in December.

December closed as a poor month for markets broadly, with the AusBond FRN the only major index to end the month in the black.

Global geopolitical uncertainties continue to dominate markets, with US trade concerns driving a turbulent November.

With now just three 25-basis point steps away from zero, there are growing expectations the RBA will cut further or even implement some form of quantitative easing.

The official cash rate has been lowered for the third time in a year, with the RBA cutting the official cash rate to a historical low of 0.75%.

Financial market participants currently expect one more cut by the end of 2019, with the Cash Rate Futures pricing in a 25 basis-point cut in October.

The RBA left the official cash rate unchanged at 1.00% at its August board meeting, saying it will monitor developments in the labour market closely.

The Australian hybrid market enjoyed another strong run in June, with the median trading margin of ASX-listed hybrids under Morningstar coverage closing at 2.56% at June’s end, down 54 basis points from May.

The Reserve Bank of Australia has cut the official cash rate to 1.25% after keeping rates on hold at 1.50% for almost three years.

The Reserve Bank of Australia defied a growing bearish overlay on interest rates by forecasters and maintained the cash rate at 1.5% at its May Board Meeting.

No major surprises as the RBA maintained the cash rate at 1.5% at its April Board Meeting. The RBA continues to play a waiting game, while economists maintained downbeat tones on the trajectory of rates.

A key development during February was the shift in the expected direction of short-term interest rates as the RBA changed their “next move is up” language with a “neutral” bias.

In line with equity markets, hybrid securities also posted a positive January led by the longer-dated bank notes.

Rate rise expectations tempered in Australia in the September quarter, with the next rate rise now priced in for early 2020.
Not surprisingly, the Reserve Bank of Australia, or RBA, kept the cash rate steady throughout the quarter at 1.50%.
In the Australian Cash Rate Futures market, the expectation of a rate rise has been pushed back to February 2019. This is unsurprising considering the ongoing dovish tone of the RBA minutes.
With consistent economic data and slightly better than expected wage inflation, economists had little reason to alter their forecasts this month.
The expectation of a rate rise has been pushed back to November 2018 after another disappointing round of inflation data and lower than expected building approvals.
In the Australian Cash Rate Futures Market, the expectation of a rate rise has been brought forward to August 2018.
In the Australian Cash Rate Futures Market, the expectation of a rate rise has been pushed back again this month, moving to January 2019.
A mixed bag of data among leading developed economies during October has seen a relatively uneventful month with respect to global bond yields.
Global bond yields were generally wider during September, as positive economic data showed signs the world economy is growing in strength.
Global bond yields continued to tighten during August, amidst a backdrop of strong employment, weak wages growth, and low inflation.
Inflation data created waves this month as weak numbers softened market expectations on tightening global monetary policy.
Sovereign bond yields moved higher in June, as perceived hawkish central bank language reverberated around the globe.
Diminishing supply underlined another strong month for hybrid performance during May, continuing the course of recent months.
It was a mixed bag for hybrid performance in April, with corporate issues drifting wider on average, while major bank issue performance was more evenly split.
It was a mixed month for sovereign bond yields after the Federal Reserve expectedly increased rates, while in Europe some green shoots started to emerge in the form of improving economic indicators.
Global sovereign bond markets rose up from the canvas in January, reminding us that it may not be full steam ahead in the global landscape, particularly in Europe.
Aside from Europe, global sovereign bond yields had a relatively muted month in January as financial markets awaited clarity from the incoming Donald Trump-led US government.
Global sovereign bond yields stabilised somewhat in December after a particularly sharp move up in November, while domestically, the Australian 10-year government bond yield was flat.
November was absolutely brutal for global sovereign bonds and money markets as investors across the globe rapidly priced in expectations of Trump's fiscal expansion and the resulting inflationary impact.
Global bond yields accelerated their widening pace during October as the prospect of a rising US Federal Funds rate became increasingly priced in.
Global bond yields, particularly at the long-end of the curve, widened during September, driven by increasing speculation of an increase in the U.S. cash rate as well as a slow-down in monetary easing programs within the European Union.
Global bond markets took a bit of a breather during August, with yield volatility significantly down on previous months.
Following significant tightening in June, July was more subdued in terms of price movements in global bond markets.
June saw a significant tightening trend in global bond markets, following the UK's 23 June voting to invoke Article 50 of the Lisbon Treaty and begin the process of formal withdrawal from the European Union.
Global bond yields generally tightened during May. Bucking this tightening trend was the US, with the Fed futures contracts implying an increasing likelihood of the Fed hiking rates in the near future.