October, 2020
What happened in the market?
There were some substantial positives for the Australian economy and its outlook in October. In its budget, the Commonwealth Government brought forward personal income tax cuts, provided a business investment tax allowance and enabled the carry-back of tax losses. The government also introduced the new JobMaker scheme whereby subsidies will be paid for certain new hires, and increased its infrastructure commitment over the next few years. Expectations then firmed for further monetary easing to support the economic recovery after Reserve Bank of Australia (RBA) speakers expressed the benefits of doing so when the economy was in a position to take advantage of it, i.e., once COVID-19 was contained domestically, allowing the economy to reopen. This was indeed the case by the end of October as Melbourne finally ended one of the world’s longest pandemic lockdowns. A number of social restrictions were re-laxed and most businesses were permitted to reopen as the state of Victoria recorded its first day of no new infections in more than four months.
Spread sectors resumed their tightening trend. Corporate sector bonds compressed around 9 bps on average while semi government spreads narrowed around 5 bps and the supranational, sovereign and agency (SSA) sector tightened around 3 bps. Non-bank corporate issuance was a little lighter in October with the Port of Melbourne, Charter Hall Prime Industrial Fund and Lend Lease all issuing 7-10 year bonds in the BBB space. International banks stepped in to issue in a month bereft of local major bank deals. Bank of China, Mizuho, United Overseas Bank and Woori Bank all issued in the 3-5 year tenors. ABS and MBS issuers continued to tap the market with new deals from AFG, Firstmac, Pepper, Think Tank and Green deals from Flexi and Brighte Trust.
The Australian dollar depreciated around 2%-2.5% versus most of the major currencies as the export commodity prices declined and the expectation of fur-ther monetary easing gained momentum. The Australian trade-weighted index decreased 2% for the month.
What happened in the Fund?
The Fund rose 0.14% outperforming the Bloomberg Ausbond Bank Bill Index which was flat in October. Outperformance was primarily attributable to the portfolio’s corporate and asset backed allocations as spreads tightened during the month.
ticker: SSB0131AU
commentary_block: Array
factsheet_url:
Under Literature -> Fund Commentary
asset_class: Fixed Income
asset_category: Australian Short Term Fixed Interest
peer_benchmark: Fixed Income - Australian Short Term Index
broad_market_index: Australian Bond Bank 0+Y Index
structure: Managed Fund