Global markets experienced a volatile but ultimately positive month, driven by shifting trade policy, mixed economic signals, and evolving central bank expectations. Early concerns about escalating US tariffs gave way to cautious optimism as a temporary easing in trade tensions with China helped buoy risk sentiment. Equity markets rallied, credit spreads tightened, and volatility declined, although market direction was still heavily influenced by political headlines rather than fundamentals. This month’s global PMIs signalled patchy momentum, with services weakening in both the US and Europe, and manufacturing activity losing steam. Inflation remained a key concern, with tariff-related cost pressures persisting despite temporary relief from lower oil prices. While investors responded positively to improved short-term sentiment, underlying macro fragilities (particularly in trade and investment) continue to weigh on the medium-term outlook.
Here at home in Australia, the economic data has been more encouraging. The job market remains strong, with April showing 89,000 new jobs and the unemployment rate holding steady at 4.1%. Wages have picked up to 3.4% over the past year, which is a welcome sign for households. Importantly, inflation is back within the RBA’s 2–3% target for the first time in a while, making it more likely the RBA will continue easing rates. We expect the RBA to move gradually, with one move per quarter, or possibly even less, over the course of 2025. While some indicators like business confidence and building approvals have softened, overall the Australian economy is holding up well. We see this as a solid backdrop for income-focused investors.
The US economy is giving off mixed signals. Some data, like retail sales and inflation, show that price pressures are still hanging around, even if headline inflation dipped recently helped by lower oil prices. At the same time, job numbers have softened and growth has slowed, leading many to expect the Federal Reserve will eventually cut interest rates, but maybe not as soon as markets once thought. Overlaid on the economic analysis is the policy consideration. For the moment, US tariff policy appears to be more favourable than feared, but the longer-term concerns remain, both around trade and the budget deficit. In Europe, conditions remain sluggish, especially in Germany and France. Inflation is easing in some areas, which gives the European Central Bank room to lower rates later this year. But growth remains slow and businesses are still cautious, especially with ongoing global uncertainty.
Credit market activities picked up especially over the last two weeks, with strong demand from investors helping new bond issues price well. In Australia, a number of issues including financial services and corporates came to market, and most found plenty of buyers, especially those offering decent yields. The environment has been helped by stable interest rate expectations and a search for income alternatives amid softer equity market returns. Subordinated and higher-yielding bonds attracted particular interest, though many defensive investment-grade issues also performed well.
In this edition, no new bonds were added to the retail menu or the Sample Portfolio.
Retail Sample Portfolio
The Sample Retail Portfolio is a balanced portfolio whereby we aim to weigh an appropriate level of risk and return. Overall, it remains more skewed towards preserving capital rather than chasing yield. It aims to have 20 positions.
This month, no changes were made to the Sample Portfolio. The running yield of the current portfolio was around 5.27%*, and the portfolio is an approximate $205k spend.
Over the past month, portfolio yields have edged lower, reflecting a more stable market environment and improving sentiment across credit markets. While risk appetite has picked up from the previous month, investors remain selective, with demand focused primarily on higher-quality, defensive names. The easing of near-term macro concerns (such as trade tensions and inflation surprises) has supported credit spreads, particularly in the investment-grade space. In Australia, yields declined modestly in line with global trends, though the move has been more orderly given the relatively steady domestic outlook. As a result, the Sample Retail Portfolio has seen modest price gains.
The Sample Retail Portfolio, along with the full list of retail available bonds, can be found on the FIIG Website here.
*Please note the indicative yield shown is the expected yield to the assumed maturity/call dates of
the bonds included in the portfolio, based on swaps rates at the time of writing.