The cupboard is looking bare for the ‘safe cash’ allocation in a portfolio. The real cash rate in Australia is zero. The largest issuer of term deposits in Australia, the Commonwealth Bank, has a 12 month rate of 3.3%. There is no significant retail corporate bond market. The hybrids raising billions of dollars are higher risk and near the bottom of the capital structure. Bond funds have suffered price falls as longer term rates rise. High-yield equities are risky in a stock market propped up by money printing and low interest rates, and direct property is experiencing its own mini bubble and supply shortage – just join one of the queues at an off-the-plan launch in Sydney if you don’t believe it.
Where do term deposit investors turn as billions of dollars of cash looks for a home?