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By guest contributor Richard Murphy, CEO and one of the founders of Australian Corporate Bond Company
XTB manager ACBC is launching 6 more exchange-traded bonds (XTBs) on ASX on 24 May, just a week after the first anniversary of its first 17 XTBs. XTBs recently won “best disrupter” at the Afiniation Fintech Conference in Melbourne and ACBC has since won two other international website design awards. The new XTBs brings the range to 39 including fixed and floating securities.
Total sales just tipped over $51 million on the ASX, which was only at $10 million at the turn of the year, so the need for many months of education before any fixed income investments flourish is obvious. Interest is growing as XTBs and others with fixed income offerings get their message out to brokers and advisers around the country.
XTB (post fee) yields range from the 2s to high 4s, which places them above term deposits in yields, without the volatility of hybrids.
More model portfolios and separately-managed accounts (SMAs) are on the agenda for the next six months with more new issuance to renew and grow the XTB range an ongoing development. Fixed-rate XTBs account for about 80% of volumes with the very-low volatility floating XTBs being used as an alternative to cash management accounts and short-dated cash accounts.
The recent rate cut should actually encourage more volumes as advisers are becoming more accepting of the “lower-for-longer” reality we are now in. The slight steepening of the curve has widened the spread of 3 to 4 year corporate bonds over cash.
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