22 December 2021
“The new year stands before us, like a chapter in a book, waiting to be written.” – Melody Beattie
Bond Market Outlook
Recent data and news flow continue to point to vigorous momentum in economic activity both at home and overseas, despite the ongoing challenges of containing the Delta variant of the COVID-19 virus and the uncertainties associated with the Omicron variant.
As we have discussed in recent editions of this newsletter, the Reserve Bank of Australia’s February meeting will set the tone for local monetary policy in 2022.
We continue to believe that monetary authorities will adapt their decision-making to evolving circumstances, and that interest rate hike cycles from 2022 – 2024 will be comparatively modest.
We believe that bond rates are unlikely to shift meaningfully for at least the next 12-18 months, and that investor concerns about rising inflation and interest rates are largely already priced in to benchmark 10-year bonds.
Existing and Forthcoming Bond Issues
The past year has been another busy and successful one for us. We were responsible for over A$10 billion in bond market transactions, applying our exacting standards and rigorous product approval process to serve the needs of an increasing number of private investors, brokers, financial advisers, companies raising money to fund their growth, and others.
These included bonds linked to global luxury automotive brand Jaguar Land Rover, real estate financier Pallas Capital, and investment group Centuria Capital.
We have a pipeline of new issues coming out in 2022 which I am very excited about.
We are currently securing an Australian dollar fixed coupon credit-linked note over Xerox Holdings Corporation. This 6.8-year note will offer a 4.30 – 4.65% fixed rate with coupons paid half-yearly.
This represents an opportunity to invest in debt linked to a Fortune 500 corporation which provides digital document products and services in more than 160 countries and to diversify with a bond not previously available in Australia.
You can read the product documentation and register your interest here.
Sharemarket Listing and Growth Priorities
As many of you will also know, we listed successfully on the Australian Securities Exchange (ASX: ABE) on 6 December. I would like to thank our advisers for their support in helping us to achieve this significant milestone.
This marked another important step for us on our journey of developing our uniquely innovative and disruptive technology-driven bond trading exchange and marketplace and increasing investor participation in the bond market.
We founded our business in 2015 because we recognised that bonds are significantly under-represented in Australian investors’ portfolios, and we aspire to become the leading centralised bond trading exchange in Australia and beyond, providing all investors with total access to the over-the-counter bond market, and simplifying the way financial markets work. We’re eliminating barriers to entry to the bond market, providing improved access, more efficient trading, lower transaction costs, and introducing new levels of transparency.
We believe that we have significant opportunities to scale our business. We’re investing to fund continued development of our market-leading technology, seeking patent protection for our trading and settlement engine, and scaling our sales and marketing activities.
We have also taken a major step in establishing our business in the wider Asia-Pacific region with the establishment of ABE Capital Markets Private in Singapore under the capable leadership of Nick Baber.
I’m excited about this next stage of our journey, and about the opportunities scaling our business will give us to help even larger numbers of Australians to discover the benefits of investing directly in bonds to generate regular and reliable income, have the security and comfort of knowing exactly when their income will be paid, have greater control over their investments, and build more balanced and diversified investment portfolios.
Finally, I would like to thank all our staff for their continuing hard work and commitment. I’m privileged to be working with a very talented group, all of whom are making significant contributions to our growth and our ability to achieve our goals as a business.
On behalf of our Chairman, Allan Farrar, our board, and all the team at the Australian Bond Exchange, I would like to wish you and your families a safe and relaxing Christmas and New Year. We will be open for business except for the public holidays (+61 2 8076 9343, support @ bondexchange.com.au), and our newsletter will return in January.
Best wishes,
Brad McCosker
Managing Director
Australian Bond Exchange