Global Investors Are Buying Up Australian Bonds | ETF Trends

With yields at record lows, investors are searching for yield wherever they can find it. One of the countries that has been seeing an influx of investor capital is Australia.

“Australia sold A$21 billion ($15.1 billion) in new 11-year sovereign bonds, its third record-breaking sale this year as global investors pile into the nation’s debt,” a Bloomberg article noted. “The 1% November 2031 bonds priced with a yield of 1.055% according to the Australian Office of Financial Management. More than A$66 billion of bids were received, which also was a record.”

The article noted that this movement to Australian bonds “underscores enormous investor appetite for yield as options shrink around the world with policymakers slashing rates to cope with the coronavirus pandemic. Australia’s debt is the second-highest yielding among Group-of-10 nations, and is underpinned by the central bank’s yield-curve control policy.”

“There’s a combination of things driving this — the RBA consistently saying rates will remain on hold, its term-funding facility and the yield pick up you can get with great carry for offshore investors,” said Prashant Newnaha, senior strategist at TD Securities.

Speaking again to low global yields, it’s one of the reasons why investors are flocking to Australian debt.

“For Japanese, European, and U.S. investors, Australian government bonds offer similar FX-hedge yields as Spain,” said Duangjai Samranvedhya, deputy chief investment officer at Jamieson Coote Bonds Pty in Singapore. “The only G-10 country with higher yield is Italy, so Australian AAA government bonds offer very attractive yields.”

Investors looking to get exposure to Australia can use the iShares MSCI Australia ETF (EWA). EWA seeks to track the investment results of the MSCI Australia Index composed of Australian equities.

The fund generally invests at least 90% of its assets in the securities of its underlying index and in depositary receipts representing securities in its underlying index. The underlying index primarily consists of stocks traded on the Australian Stock Exchange. It will include large- and mid-capitalization companies and may change over time.

EWA Chart

EWA data by YCharts

Another ETF to consider for bond exposure is the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

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