Down Under bonds return on property, banking rebound

Bloomberg

The $125 billion US dollar bond market Down Under is making a comeback, boosted by the recovering housing and banking sectors.
US-currency notes issued by Australian REITs and mortgage asset firms are returning 9.1 percent this year compared with a 0.1 percent drop in 2018 as a rebound in property prices has gathered pace since June.
Dollar bonds from the nation’s banking sector have made 8.4 percent compared with 0.2 percent last year.
That comes after the surprise election victory of a government seen as friendly toward the industry, which also weathered a misconduct probe.
Two interest-rate cuts since June and an easing of lending rules to allow home buyers to borrow more have improved sentiment toward Australian bonds. Yield premiums on the country’s dollar notes have also tightened less than those on debt from Asia outside Japan this year, spurring investors to consider venturing beyond the region’s $766 billion US currency note market and park their cash in Australian debt.
“The consolidation of the property market seems to have stabilised and in
fact shows some signs of improvement,” said Arthur
Lau, co-head of emerging markets fixed income and head of Asia ex-Japan fixed income
at PineBridge Investments Asia Ltd.
Risks for Australian bonds include the subdued outlook for the economy, which is creaking under record household debt and stagnant wages. Economists are forecasting a 20 percent chance of recession within the next 12 months.