Foreign demand for bonds forecast to remain strong
International investors have flocked to relatively high-yielding Australian government bonds in the past few years, after US and eurozone countries slashed their interest rates to historical lows.
Fidelity fixed-income investment chief Andrew Wells said this trend was likely to continue despite the recent rate cuts by the Reserve Bank.
"If you are sitting in Australia, you probably think international investors will be less interested [after the rate cuts]," he said. "However, if you look from overseas, Australia is still a very, very attractive place to invest."
Mr Wells said many clients were coming out of Italian bonds and "buying Australian, Norwegian and Swiss and all these other high quality bonds, because they don't like the volatility in Europe".
He said conditions in Europe were still very bad.
"In Europe, the big problems are so big, basically they will have low interests for a long period of time," Mr Wells said.
Frequently Asked Questions about this Article…
Fidelity Worldwide Investment says foreign demand for Australian government bonds remains strong and is likely to continue, even after recent interest rate cuts by the Reserve Bank of Australia.
International investors have been attracted to relatively high‑yielding Australian government bonds after the US and eurozone slashed interest rates to historical lows, making Australia comparatively more attractive.
According to Andrew Wells, Fidelity's fixed‑income chief, the trend of foreign investors buying Australian bonds is likely to continue despite the Reserve Bank's recent rate cuts — from overseas Australia still looks very attractive.
Fidelity reports many clients are moving out of Italian bonds and buying Australian, Norwegian, Swiss and other high‑quality bonds because they don’t like the volatility in Europe.
Andrew Wells says conditions in Europe remain poor and volatile; as a result, investors are favoring higher‑quality, less volatile sovereign bonds like those from Australia, Norway and Switzerland.
The comments came from Andrew Wells, Fidelity's fixed‑income investment chief. Fidelity Worldwide Investment manages about US$240 billion in assets, according to the article.
In the article’s context, 'high‑quality bonds' refers to sovereign bonds from countries cited as attractive by investors — examples given are Australian, Norwegian and Swiss government bonds.
The US and eurozone slashed interest rates to historical lows, which pushed international investors to seek relatively higher yields elsewhere — contributing to strong demand for Australian government bonds.
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