The current uncertainty surrounding the European and United States economies has provided an opportunity for the Australian bond market to provide greater depth for investors, according to senior executives of a fixed income fund manager.
“The Australian bond market now is almost providing a flight to quality, which is quite ironic. You’re getting US rates going higher and we rally on the back of that as people are moving to our market because of the strength of the Australian economy and our financial system,” Altius Asset Management senior portfolio manager Gavin Goodhand said.
Altius Asset Management chief investment officer Bill Bovingdon said the increasing interest in the domestic fixed income market might lead to other fundamental changes and open opportunities to other potential bond issuers, such as large corporate organisations like BHP Billiton.
“We’re already seeing diversification and we’re looking at high-grade alternatives outside of US Treasury. Some of the very strong non-financial corporates with immaculate balance sheets could have better prospects,” Bovingdon said.
Highlighting the benefits some corporate bonds have over government bonds is the fact some organisations such as Toyota are retaining AAA credit ratings while the overall country rating is being downgraded.
“I think strong corporates will probably do okay in this current environment because they’re able to step away from the government issues and remain more globally focused,” Goodhand said.
