In its decision this week to hold the cash rate at 1.5% for a record 23rd month, the Reserve Bank acknowledged that: "In Australia, short-term wholesale interest rates have increased in recent months." But it was surprisingly vague on the reasons: "This is partly due to developments in the United States, but there are other factors at work as well. It remains to be seen the extent to which these factors persist."
What's happening is a complex mix of market disruption in short-term funding, the end of the 'carry trade', the new BBSW fixing method and FX hedging costs. Some smaller banks have already increased home loan rates. It's a reminder that lending rates can rise out-of-cycle with the cash rate, with adverse implications for property prices when combined with tighter lending standards. However, anyone who owns hybrids is benefitting from rising 3-month bank bill rates.
Rising short-term funding costs for banks in Australia
Source: Bloomberg, AMP Capital
First edition for the new financial year, something for everyone
Dawn Kanelleas favours the often-overlooked mid-cap part of the market, and Ben Rundle says the more he studies companies, the more he sees great corporate cultures driving market share gains and success. The White Paper from Insight Investment is the outlook from 10 of their portfolio managers to assist in your new year strategies.
Many Australian investors, especially SMSF trustees, are underexposed to global equities. For example, the largest super fund in the country, AustralianSuper, now has 37% of its balance option in global shares. Ashley Owen explains the performance of hedged versus unhedged global portfolios, and checks ASX sector results last year. Peter Rae gives his recommendations on global listed funds and Warryn Robertson reveals his 'Golden Rule' on global investing. We include the latest reports from Independent Investment Research below.
Two high-profile names with exclusive insights: Jeremy Cooper argues for greater focus on the retirement phase of superannuation, while Phil Ruthven provides some great charts on who owns and earns the most in Australia, and why the ASX is underperforming global markets.
With the Royal Commission continuing its hearings this week, a couple of interesting transcripts show where the Commissioner may be heading, and why being a witness is a tough gig.
This week we have new reports which will become a regular feature. The ASX will provide Cuffelinks readers with its Monthly Investments Products Report, and its Bond and Hybrid Report to complement the weekly numbers from NAB/nabtrade. Lots of good stuff in the Additional Features below.
And as an England fan with 52 years of hurt and raw nerves after the last game, I've joined the millions of deluded idiots singing the old 'Football's Coming Home', viewed 8.6 million times.
Graham Hand, Managing Editor
Edition 261 | 6 Jul 2018 | Editorial | Newsletter