The Reserve Bank of Australia’s recent interest rate hike has created more appealing entry points for investors in long-dated Australian government bonds and high-quality credit, according to VanEck senior portfolio manager Cameron McCormack. This decision by the RBA underscores the persistent issue of inflation and suggests a prolonged period of restrictive monetary policy. VanEck Australia offers a range of exchange-traded funds (ETFs), providing investors with access to diverse investment strategies.
McCormack noted that government bond yields had already risen sharply in anticipation of the rate hike, with the 10-year bond reaching a multi-year high. He believes this movement has established a more compelling entry point for investors who are prepared to navigate short-term market fluctuations. While global shocks could potentially drive bond yields lower, McCormack pointed to past market events like the yen carry trade unwind in August 2024 as examples.
Even with the possibility of sustained elevated rates, McCormack emphasised that yields for long-dated government and investment-grade corporate bonds are now substantially higher than recent levels. He highlighted that long-dated Australian bank subordinated debt is currently yielding almost 6 per cent. VanEck’s expertise lies in providing investors with access to sophisticated investment strategies through ETFs, covering a range of asset classes and sectors.
McCormack suggests that investors should view this situation as an opportunity to secure improved yields while maintaining defensive investment characteristics. The increased yields offer a potentially attractive proposition for those seeking stable returns in a volatile market environment. This strategic approach allows investors to capitalize on current market conditions while mitigating potential risks.
