Earlier in the week I was at a meeting whereby one of the attendees suggested that in a balanced portfolio (~70% equities) the equities proportion adds around 90% of the risk, and then in yesterday’s Australian Financial Review I see a headline quote from Stephen Nash (FIIG Securities) that said, “If investors replaced half their …
Tag Archive: fixed interest
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Sep 20
What returns should bonds provide over the next 5 years?
This is one of the most frequent questions I am asked by advisers and my usual answer is, “well, the yield of Australin bonds is around x% so that’s pretty much what you should expect to receive”. I’ve pretty much accepted that my answer is roughly correct but never really tested its accuracy..until now! Source: …
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Sep 16
Australian Government Bond Yield Curve…still dropping
Source: Reserve Bank of Australia I’ve just updated my last yield curve from just over two weeks ago and as the above chart shows yields have dropped another ~40bps since then. This is an indication of the lack of global stability driven out of Europe and US and a resolution to their issues is clearly …
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Sep 10
A few thoughts on investment strategy for today
With the US heading towards recession and the Euro Sovereign Crisis getting ugly again where to invest one’s funds has never been tougher. Australian bonds yields are around 4%, meaning they are on PE ratio of 25 which compared to local and global shares, which are currently on forward PEs of around 10, are very …
Aug 30
Australian Government Bond Yield Curve…bearish look
As the chart above shows it was another great month for bond investors. Over the last 3 months, yields have dropped around 100bps across the curve which for many bond funds (duration of at least 3 years) results in capital growth of at least 3% is addition to the usual income of around 5%pa. This …
Aug 19
Another dodgy market update
Obviously a pretty difficult investment environment at the moment. Markets tanking again overnight and following on in Australia this morning. Watching Billabong drop around 25% this morning demonstrates the benefits of diversification…I’d hate to be an adviser with an overweight Billabong position in my client’s portfolio. Anyway I digress. Volatility in the sharemarkets will continue for many …
Aug 08
So much for the downgrade…it’s all about growth expectations
So the US has just had its first trading day since S&P downgraded US debt to AA. A downgrade in anyone’s debt would normally result in an increase in yields as the debt is viewed as riskier so investors expect a higher yield to be compensated for that risk. What happened in the US overnight …
Aug 03
De ja vu?…and a messy interest rate commentary
Maybe I’m missing a few details and hopefully I’m wrong but I remember in the middle of 2008 the RBA were talking up inflationary concerns due to the China effect, raising and threatening to increase rates despite overseas blow-ups (Bear Stearns, etc). Right now, it has a similar feel, the RBA is once again concerned …
Jul 28
European trouble again?
Italy – Germany 10 Year Bond Spread Source: Bloomberg The above chart shows the spread between Italian 10 year bonds and German 10 year bonds. I found it via Paul Krugman’s blog. As Krugman suggests it looks like things are starting to look pretty grim again in Euro land as the spreads are heading towards …
Jul 28
Inflation Up? Not really just interest rate rise panic
The above chart has been copied from www.rba.gov.au and shows annual CPI change over the last 16 quarters and guess what? The latest quarter’s figure, excluding volatile items is 2.5%! Right in the middle of the RBA’s inflation target of 2% to 3%. When the Reserve Bank looks at inflation they do not, or should not, consider …