The rise in rates since the start of the year has been historic – the fastest in the bond market in nearly 40 years. This means that there are opportunities across the whole spectrum of the market for the first time in a long time, as yields on all bonds are markedly higher, and in many cases higher than the dividend yield available on the equivalent shares.
Investors have been on a wild ride this year, from escalating inflation concerns to faster rate hikes, increased equity volatility and heightened recession fears. There’s a lot going on in markets right now, and it’s likely to get even more interesting. Here we provide a market update and discuss how bonds can alleviate some concerns for investors.
The current portfolio has 13 bonds, yields 5.91% indicatively to worst* and is an approximate $200k spend.
New issues update
Opening a FIIG Direct Bonds account has never been faster or easier with FIIG’s online application process.
Unlike equities, bonds have a specific repayment date when the issuer must repay full principal back to bondholders.
We are seeing AAA rated covered bonds being issued by banks with yields near 4.5%, and solid investment grade bonds well over 5%.
New issues update
Ensuring the investment strategy of a self-managed superannuation fund (SMSF) accurately reflects its current asset allocation is an important compliance responsibility. While there is a degree of flexibility with respect to movements in your overall asset allocation, it is good practice to review your current asset allocation against your documented strategy.
With FY22 in the rear-view mirror, it’s a logical time for clients to review thoughts on their portfolio mix across sectors – and also within their bond portfolios.