Creating a diverse portfolio of hybrid and fixed income securities has helped the two best-performing Australian bond funds, according to research.
The performance comes as in Australia, the Reserve Bank of Australia (RBA) had brought forward its expected date for rate rises while the US Federal Reserve declared an end to its large scale quantitative easing programme.
Shane Oliver, chief economist at AMP Capital, said: “While the RBA does not see the conditions being in place for a rate hike (sustained 2% to 3% inflation, full employment and 3% or more wages growth) until late 2023, it has effectively brought forward its assessment from 2024.
“We expect that the conditions could be in place by late next year and so are allowing for two rate hikes in November and December 2022 taking the cash rate to 0.5%. That said, this is still a year away and we agree with the RBA’s assessment that inflation pressures are less in Australia than in many comparable countries.
“For fixed income, monetary tightening initially means higher bond yields and so is negative for this asset class. Only when monetary policy becomes tight, seriously threatening economic growth, will long-term bonds decline significantly.”
According to FE Analytics, over one year to 31 October, the best-performing Australian bond fund within the Australian core strategies Australian bond sector was...