Executive Summary: RBA Policy Outlook and Fixed Income Strategies
LIVE
/
🔉🔉🔉 CLICK TO UNMUTE 🔉🔉🔉
0:00
PRIVATE CONTENT
OK
Enter password to view
Please enter valid password!
In a discussion with Livewire Markets, Cameron Gleason of BetaShares outlined expectations for RBA rate cuts and strategies for income-focused investors amid shifting monetary policy. Below are the key takeaways:
- RBA Rate Cut Expectations: Three cuts are anticipated in 2024, with the first likely in May. This aligns with CPI returning to the RBA’s target band and global economic uncertainties warranting an “insurance policy” easing.
- Income Challenges: Falling cash rates and declining ASX 200 dividend yields (notably from materials stocks) are pushing investors toward alternatives like term deposits and fixed income. Hybrid securities (e.g., big bank hybrids at ~6% yield) and corporate bonds (~5.5% yield) are highlighted as viable options.
- Australian Fixed Income Appeal: Government and corporate bonds are seen as well-priced, offering diversification and attractive risk-adjusted returns. Corporate credit, in particular, is noted for its high quality and low volatility.
- New Defined Income ETFs: BetaShares launched three ETFs (28BB, 29B, 30BB) maturing in 2028–2030, replicating bond characteristics with ETF advantages: monthly fixed distributions, capital return at maturity, and diversification across a bond portfolio. Yields range up to 4.5% post-fee, surpassing term deposit rates (2.8–3.4%).
- ETF Advantages vs. Term Deposits: While term deposits offer government guarantees, ETFs provide higher yields, liquidity (no lock-up period), and institutional-scale execution—critical for retail investors facing OTC bond market inefficiencies.
Actionable Insight: Investors seeking stable income in a falling-rate environment should consider laddering defined income ETFs (e.g., 28BB, 29B, 30BB) to match cash flow needs, while retaining liquidity and diversification benefits absent in direct bond holdings or term deposits.