July bond performance

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July was a strong month for bond returns, recovering from three very poor months in April, May and June. The Greek debt crisis and massive volatility in the Chinese sharemarket saw strong global demand for the safety of bonds in July. Long dated bond yields fell slightly more than shorter dated bonds and this saw semi government and government bonds top the bond index returns for the month. Semis returned a healthy 1.47% and government bonds returned 1.42%. The composite bond index which covers around 400 securities returned 1.30% while corporate bonds and FRNs returned 0.84% and 0.32% respectively. The bond market is grappling with an imminent US interest rate rise that now looks most likely in the last quarter of 2015. Do investors stay in bonds or do they move to equities? The Fed is waiting for data confirmation about the US economic recovery, in particular wages growth. The unemployment rate has already shown good improvement but wages have not improved markedly. Yearly returns of around 7.00% are shown below.

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Security1m Return (%)12m Rolling Return (%)
Bank Bill0.182.55
Composite Bond1.36.69
Government Bond1.426.95
Semi-Govt Bond1.477.14
Corporate Bond0.845.86
FRN0.323.34

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