Global markets remained volatile over the past month, as sentiment oscillated between optimism and caution. Initial relief around US-China tariff de-escalation and policy support from China spurred a rally in risk assets and a tightening in credit spreads, particularly in US high yield. However, this was quickly offset by renewed geopolitical tensions and legal uncertainty, with Trump’s reinstated tariffs and escalating rhetoric on the EU and other trade partners. Meanwhile, concerns over U.S. fiscal sustainability intensified following Moody’s downgrade and weak Treasury auctions, driving volatility in long-end yields. Despite softer inflation prints and a more dovish Fed tone, Treasury yields were pulled higher by persistent supply pressure and political noise. Japan’s engagement on ultra-long bond issuance and the ECB’s cautious stance also contributed to a backdrop of conflicting signals, supporting duration but with elevated curve risk.
In Australia, the RBA delivered a widely expected 25bp cut to 3.85% but struck a tone that was more dovish than markets anticipated. Labour market data remained strong, with 89K jobs added and a rebound in participation, but forward-looking indicators such as the Westpac Leading Index and PMIs pointed to moderating growth. Headline inflation remained contained, though upcoming changes to energy subsidies are expected to reaccelerate CPI prints. Credit markets remained active, with several large deals including Macquarie and Westpac (clearing with limited concession) reflecting strong investor demand for high-quality names. In Europe, the data underscored a fragile recovery, with the May composite PMI falling below 50 and services inflation staying sticky. Despite soft fundamentals, the EUR primary market was strong, with Eur62bn in weekly issuance at one point, as investors sought quality credit amid policy stability and reduced tariff risks.
Against the past month’s backdrop, we maintained our existing positioning. Although yields have edged lower, particularly in short to medium tenors, we refrained from adding risk or duration as the current volatility stems more from positioning and technical factors than a fundamental shift in outlook. Therefore, 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.
Given the ongoing volatilities in the market, we held the portfolio unchanged for this month, no changes were made to the Sample Portfolio. The running yield of the current portfolio was around 5.17%*, and the portfolio is an approximate AUD205k spend.
Over the past month the portfolio yields have moved lower and further driven by news headlines rather than credit fundamentals. Our portfolio continues to favour high-quality credit, particularly in financials and defensive sectors, supported by strong investor demand and resilient primary issuance trends. The tightening in spreads has not been matched by a change in macro-outlook, and we remain cautious about adding duration until there is more clarity on the inflation path and central bank policy. Our preference for the 7-year part of the curve remains intact, offering an attractive balance between yield and duration risk. The overall environment continues to reward selectivity and quality carry, and we see no need to alter the portfolio at this stage as the market continues to shift rapidly.
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.