Skip to main content

      More Results
        More Results

        From Sectors and Smart Beta to Fixed Income, SPDR Exchange Traded Funds (ETFs) give you wide access to diverse investment opportunities. Find out more.

        Okay

        Insights

        Floating Strong to Finish in 2023

        Simon Mullumby, CFA
        Head of Australian Cash and Bonds

        Q4 2023 was a volatile quarter for most asset classes. Senior unsecured floating rate AUD bank debt continued to perform impressively over the period as bonds rallied markedly following a US Treasury rally.

        The last quarter of 2023 was again positive for investment grade senior unsecured AUD bank debt. Outside of the marked change in sentiment in rates markets globally, both the primary and secondary FRN (Floating Rate Notes) market was very well supported over the period. As mentioned above, there was a marked rally in US rates over the quarter that drove many yield curves to post impressive gains over the quarter. It is becoming apparent that many central banks globally have managed to take the wind out of the inflationary sails that were concerning bond investors for the last 18 months. Leading and lagging economic indicators are indicating that the Federal Reserve has constrained inflation whilst potentially engineered an economic soft landing. A goldilocks scenario of sorts that drove equity markets higher and bond yields lower on expected lower inflation and easier monetary policy at some point. This made sense if bonds were rallying on good news and equity markets were embracing risk on potential economic soft-landing scenarios and looser monetary policy that credit would do well. And it did.

        Domestic and International banks tapped the primary market in maturities that ranged from 1-5yrs during Q4 and investor support was apparent. The Australian money market for most of the quarter in a risk on style mind set that was mirroring the US rally described above. Although it is yet to be seen if the RBA (Reserve Bank Australia) has driven inflation low enough over the medium term, whilst also increasing the unemployment level to mid-4ish% by the end of 2024 as per their explicit focus, money market participant were buoyed by the potential for central banks globally to be nearing or at an end to their respective tightening cycles. This led to both balance sheets and real money investors to heavily subscribe to investment grade bank issuance in AUD Floaters over the quarter. Banks issued substantial deals that were both heavily oversubscribed and that also had eventual deals price at spreads well inside original indications of interest when deals first launched. All strong signs of a credit market looking for good quality names paying a spread well above 3-month BBSW (Bank Bill Swap Rate).

        As at the end of 2023 the portfolio had posted impressive gains versus its requisite benchmark over the year. Given both the economic and rate environment expected for 2024 domestically and globally, it seems fair to anticipate that investment grade AUD issued bank floating rate debt will again post palatable returns in 2024.

        More on Fixed Income

        Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) ("SSGA, ASL").  Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Web: www.ssga.com. 

         

        SSGA, ASL is the Responsible Entity and the issuer for the State Street Managed Funds, which are unquoted, and the SPDR® ETFs which are quoted on the AQUA market of the ASX or listed on the ASX. SSGA ASL is the AQUA Product Issuer for the CHESS Depositary Interests (or "CDIs") created over interests in the SPDR® S&P 500® ETF Trust (“SPY”) which were first quoted on the AQUA market of the ASX on 13 Oct 2014. State Street Global Advisors Trust Company (ARBN 619 273 817) is the trustee of, and the issuer of interests in, the SPDR® S&P 500® ETF Trust, an ETF registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 and principally listed and traded on NYSE Arca, Inc. under the symbol "SPY".

         

        This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure statement, available at ssga.com, before deciding whether to acquire or continue to hold the Funds. Target Market Determinations can also be found at ssga.com.  This material should not be considered a solicitation to buy or sell a financial product or security. 

         

        Investing involves risk including the risk of loss of principal. Diversification does not ensure a profit or guarantee against loss.

         

        Risk associated with equity investing includes stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.

         

        ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF’s net asset value. ETFs typically invest by sampling an index, holding a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index.  

         

        SPDR®, Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC, ASX® is a registered trademark of the ASX Operations Pty Ltd], these trademarks have been licensed for use by S&P Dow Jones Indices LLC and licensed for use for certain purposes by State Street. MSCI indexes are the exclusive property of MSCI Inc.(“MSCI”). MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by State Street.  The products referenced herein are not sponsored, endorsed, sold or promoted by any of these third party entities and none of these entities bear any liability with respect to the products or make any representation, warranty or condition regarding the advisability of buying, selling or holding any products issued by SSGA, ASL.

         

        There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

         

        The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA ASL’s express written consent.

        © [[]] %%State Street Corporation%%. All rights reserved.