For anyone paying attention, one of the H&H’s excellent calls a few months ago was to get long Australian bonds as the RBA’s fantasy of future growth ran into the nasty reality of a housing and China bust. To wit, today we see bond returns jumping:
Damien Boey of Credit Suisse is another bond bull that can take credit. Today he explores how far the trade yet has to run:
In our recent article “Harvesting term risk premia in equities” dated 13 November 2018, we argued that:
- European sovereign risk was likely to cause US bond yields to peak, based on our augmented term premium framework.
- There was much more room for Australian bonds to rally relative to US bonds, because impaired monetary transmission, and domestic slowdown were likely to push short- and long-term neutral rates lower.
- Within the equity market, bond proxies, like A-REITs should outperform.