Bond yields crept higher on the RBA rate outlook, with the Sample Retail portfolio now yielding 5.61% for the month. Here we provide an update for February.
Following the Reserve Bank of Australia’s (RBA) rate hike this month, its first since 2023, bond yields fluttered higher in response to the more hawkish (but non-committal) tone. The RBA commentary acknowledged inflation picked up ‘materially’ in the second half of 2025 and its trimmed mean inflation forecasts were revised up to remain above 3.00% through 2026. Its target inflation rate is expected to return to 2.5% in the middle of 2028, later than what was initially forecast. At the time of writing, the market is pricing in the next rate hike for May, which at this point could possibly be the last one for the year. Time and data will tell.
Off the back of this rate outlook, bond yields have remained elevated, creeping higher since our last update, and as such the Sample Retail portfolio now yields 5.61% - without any changes being made to the underlying portfolio, noting this is with an 84% allocation to investment grade bonds. With base rates up, investors are able to achieve attractive higher returns without having to take on incremental risk.
While it’s only the second month of the year, the primary market has had a strong start - with AusNet Holding Services, Westpac and Aroundtown S.A among others, bringing new deals to market and to strong demand. It sets a promising tone for the year ahead. New issues are available to wholesale investors only, but retail investors benefit from the increased liquidity and supply that comes as a result of an active new issuance.
As mentioned, there were no changes made to the portfolio for this month, and no new bonds added to the retail offering (largely due to few bonds being issued in January to then season for retail investors).
Here we provide an update on the Sample Retail Portfolio for the month of February.
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 5.61%* to maturity for the month, with 15 bonds and has approximately AUD207k invested.
After having made changes the prior month, we left the portfolio for February unchanged, noting the beauty of a bond portfolio is that it can be left untouched to collect coupons unless there is a reason to adjust positions. With the pivot to rate hikes from the RBA, we’re in favour of adding more floating rate bonds to the portfolio, as they typically offer capital price stability and higher cashflows in a rate rising environment. We continue to look for opportunities to add to our floating rate note allocations through new retail bonds and also supply in existing ones.
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.