Bank of America points to the potential for growth in Australian bonds amid global dollar devaluation. In their research note, former FX strategists highlight the Australian fixed-income market as a potential hotspot for capital inflows.
Dollar Devaluation Trend
The report mentions that dollar devaluation has become a significant theme in recent years. The authors emphasize that small shifts in global fund managers' asset allocations could greatly impact demand for Australian financial instruments.
Increased Demand for Australian Bonds
Bank of America notes that the 10-year yield on Australian bonds is about 4.24%, which is relatively close to the U.S. equivalent. It is predicted that the spread will widen, which will support demand for Australian assets.
Future of the Australian Bond Market
With the rise in interest for 'bonds far from U.S. politics,' the demand for Australian assets could increase. An increase in demand for Australian bonds is expected to lead to higher prices and improve financial metrics.
The conditions in the global financial market and changing investor sentiment towards the dollar create opportunities for increased interest in Australian bonds as a safer alternative.
