International Bonds Weekly : The Kangaroo Report
Australian stocks at at 3 1/2 week low and AUD/USD at a 6 month high.
Mind warp ?
Poor jobs data out on Wed failed to deter the currency from stampeding past 0.94 and we are hanging at 0.9385 now on the EURUSD correction as I type.
Australia in Brief (prices and rates indicative and unverified)
I was so wrong about the AUD back in April, for assuming an immediate bias against the currency right after the CNY’s band widening and just simply forgetting that there are larger forces at work in a risk free world and AUD is the best AAA (all round unlike the NZD which is split Aaa and AA) yielding currency that you can find out there.
The Australian dollar has been buoyed this week by the RBNZ and the BOE who hiked rates and warned about hiking, respectively.
I believe that reality will come to bear in the weeks ahead and we should see AUD’s 5.41% gain against the USD, year to date and 5.1% since Mar, give up some gains.
Next week we will have the US FOMC (19 June 2am, Singapore time) which will be preceded by the release of the RBA’s June Meeting minutes on 17 June, otherwise we are light on data till month end.
Going by my expectation for a US bond correction after the BOJ (today) and into the FOMC, I expect some good buying opportunities for kangaroo bonds to arise.
Some unverified prices of Kangaroo bonds issued this year.
Related Article :
The Rise of The Kangaroo – AUD Bonds, 4 June 2014
Qualifiers : This is not a recommendation to buy bonds or constitute as investment advice of any form.
Note that buying a bond denominated in another currency carries foreign exchange risk and can result in capital losses or gains.
Bond prices fluctuate on interest rates and credit pressures. Do not buy bonds if you are unfamiliar with the risks involved.
Is Australia called the “Lucky Country” or is that Ireland? Whatever, Australia hs been pretty lucky over the past couple of decades. Lucky in the sense they had China on their doorstep and China wanted exactly what they had to sell…commodities…Iron Ore etc. And so Australia has looked oh sooooo clever, hasn’t it? This iron Ore business has brought huge prosperity to a whole population, who otherwise would mostly be considered pretty poorly educated and without skills.
But, now that luck may have run out. China isn’t buying as much as before, it doesn’t need any more. Worse, its miraculous business in infinite rehypothecation of Copper, Iron Ore and Gold, to obtain credit notes and play a gigantic carry trade game, has come to a screeching halt.
Which means the Australian mining business, i.e., the Australian economy, has come to a screeching halt too.
Now, whats that you say about the recently strong Australian dollar? Well, Australian municipalities, having done nothing to prepare for a rainy day, or decade or two, need cash. So they are selling infrastructure assets. Guess whose buying? Foreigners of course. And what do foreigners need to buy Australian assets? Australian dollars, thats what. So, the Australian dollar rally won’t last.
Now, what do we imagine Australia will end up looking like without its booming mining business? For an answer, think Northern England, think what happened there after their mining and steel industries were shut down…think Saudi Arabia if oil runs out…think not a pretty picture.
I was quite an advocate of the balanced budget idea that Australia adopts.
Give back to the current taxpayers what you don’t need which is also why Australia has perhaps less than 1/4 of Singapore’s MAS foreign reserves. That makes them quite impotent as a central bank, I think and so perhaps Singapore’s reserves and more reserves is a good idea ?
I guess with the amount of AUD in international circulation, it can probably buy up the entire country….. unless they start marking up their prices !
They are doing the migration model, incidentally, to increase the population to over 30 mio in the next decade. That should do the trick ?