Bond yields have crept higher over the month, with better-than-expected data prints and longer dated US Treasury yields driving up global yields, and the Sample Retail Portfolio now yields 6.09%*.
The news of late in bond markets has been yields reaching multi-year highs, with the Australian Government 10-year bond yield breaking through the 5% level in late August. At time of writing, it’s sitting around 5.22%, the last time it was this high was in 2011. The move in yields has been spurred on by several factors, the longer end has crept higher on concerns around the highly indebted US Government, with investors seeking a commensurate yield for the risk, along with stronger domestic prints coming in better than expected, among others.
The FY26 reporting season was also a focus across August, with most issuers reporting a strong set of results and a mixed outlook for FY27. While some sectors are expecting continued growth, others are forecasting for earnings to ease given the macroeconomic backdrop. Although despite this, none were of concern.
With the reporting season underway, companies returned to the AUD-bond market to issue new deals, and while retail portfolios due to regulatory restrictions aren't able to participate in primary markets, the activity in wholesale portfolios creates supply for retail investors.
We added a new bond to the retail product offering for the month, with the senior unsecured Dyno Nobel bond coming on board, and available at a yield around 6.30% to maturity. With yields higher, there are attractive returns on offer, even from senior unsecured investment grade bonds.
Here we provide an update on the Sample Retail Portfolio for the month of September.
Retail Sample Portfolio
The Sample Retail Portfolio is a balanced portfolio, designed to offer an appropriate level of risk with return. Overall, it remains more skewed towards preserving capital rather than chasing yield.
The portfolio is expected to yield around 6.09%* to maturity for the month, with 15 bonds and has approximately AUD207k invested.
With the new available Dyno Nobel 2035 senior unsecured bond, we added this to the portfolio for the month for its attractive yield and investment grade credit rating. We swapped out our $20k holding of Qube Treasury to make room in the portfolio, which currently has a corporate action underway. While we have no credit concerns with the issuer, Qube was recently acquired by Macquarie Asset Management, following this, there is a change of control option where noteholders have the option to sell back their bonds at par ($100). Given this, we have exited the position for a holding of a similar credit quality and tenor.
To bolster the portfolio return, we decided to split the $20K Qube holding with $10k going to the purchase of Dyno Nobel 2035, as mentioned, and we also increased our holding of Aurizon 2034 by $10k. This provided the portfolio with a higher running yield and a slightly better credit quality.
The Sample Retail Portfolio, along with the full list of retail available bonds, can be found on the FIIG Website here. Factsheets are also available via MyFIIG.
*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.