InvestSMART Interest Income Portfolio Update - December 2018
Portfolio produced a return of 1.66% (after fees) during the December quarter and no changes were made.
iShares Treasury ETF (IGB) and the Vanguard Australian Government Bond Index ETF (VGB) added 0.96% and 0.64% respectively as the Australian bond market saw strong inflows during the quarter as risk-off sentiment grew. The Australian 10-year bond yield fell 36 basis points (0.36%) over the quarter to its lowest level since November 2016 illustrating just how strong the demand for bonds was in the final quarter. The RBA made no major change to its RBA rate outlook for 2019 and we saw no change to Australia’s AAA credit rating either (nor have the major rating agencies put it under review). With Australia’s AAA credit rating remaining rock solid the Australian bond market remains an attractive investment option for money that’s looking for safety.
Looking to the floating notes and money market side of the portfolio, the Bank Bill Swap Rate (BBSW) fell throughout the final quarter as growth assets were liquidated and investors remained in cash. Note yields moved lower as capital appreciated, seeing FLOT and QPON both attributing to the overall performance of the Interest Income Portfolio.
The Interest Income Portfolio remains a domestically focused interest portfolio. It provides a solid, defensive option for investors looking to add defensive assets to their existing portfolio structures or those looking to protect their capital.
To see more information on our Interest Income Portfolio, click here.