Hold off until December MYEFO

Big issues are mounting for Australia, I would wait until the Federal Government mid year Econonic and Fiscal Outlook in December before committing to buy more hybrids.

By David Bickford · 18 Nov 2014

By David Bickford ·
18 Nov 2014

Comments

Big issues are mounting for Australia, I would wait until the Federal Government mid year Econonic and Fiscal Outlook in December before committing to buy more hybrids. I certainly would not be buying the Alternative Tier 1 hybrids at current margins despite the recent sell off.

Australia's budget position will be impacted by falling commodity prices, particularly for coal and iron ore. If the budget position continues to deteriorate, remedial government action may be necessary to reduce spending or raise taxes.

Such action would likely see more weakness in hybrids as markets anticipate a slowing in economic activity. Fixed interest can exhibit a variety of risk profiles. The lowest risk corporate security on the ASX is the CBAHA, a senior unsecured floating rate note, and a good one to park some cash in if needed, otherwise look for some short term term deposits.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

More information on Commonwealth Bank of Australia (CBA)

Frequently Asked Questions about this Article…

Why should I wait until December to invest in hybrids?

It's advisable to wait until the Federal Government's mid-year Economic and Fiscal Outlook in December before investing in hybrids. This report will provide insights into Australia's economic situation, which could impact hybrid investments.

What are Alternative Tier 1 hybrids, and why should I avoid them now?

Alternative Tier 1 hybrids are a type of investment that currently have unattractive margins despite a recent sell-off. It's recommended to avoid them until the economic outlook becomes clearer.

How do falling commodity prices affect Australia's budget position?

Falling commodity prices, especially for coal and iron ore, can negatively impact Australia's budget position. This may lead to government actions like spending cuts or tax increases, affecting economic activity.

What might happen if Australia's budget position continues to deteriorate?

If Australia's budget position worsens, the government might need to take remedial actions such as reducing spending or raising taxes, which could lead to weaker hybrid markets and slower economic activity.

What is the lowest risk corporate security on the ASX?

The lowest risk corporate security on the ASX is the CBAHA, a senior unsecured floating rate note. It's a safe option for parking cash if needed.

Are there safer investment alternatives to hybrids right now?

Yes, instead of hybrids, consider investing in the CBAHA or short-term term deposits, which offer lower risk profiles.

What are the risks associated with fixed interest investments?

Fixed interest investments can have varying risk profiles. It's important to assess each option carefully, especially in uncertain economic times.

How can I stay informed about changes in Australia's economic outlook?

Keep an eye on the Federal Government's mid-year Economic and Fiscal Outlook in December, as it will provide valuable insights into the country's economic situation.