UBS Asset Management has forecast a relatively positive year ahead for the Australian fixed income market, propped up by continued demand from Asian investors.
Speaking at a roundtable event at the Swiss bank’s Sydney headquarters on 20 December, Warren Tease, UBS Asset Management deputy head of fixed income for Australia, anticipated “moderate returns” for 2013.
“We have confidence in the yield curve over the next 12 months or so,” added Anne Anderson, head of fixed income for Asia Pacific.
“There’s very powerful momentum in corporate debt and we think that’s something that is likely to continue over the next couple of years,” Anderson said.
The relative success of Australian bonds in particular is being driven by continued demand from Asia, especially the Japanese retail investor market, whose traditional appetite for absolute returns has been unaltered by the financial crisis, the roundtable heard.
European corporate investors, as well as offshore and sovereign wealth funds, are also indicating interest in Australian fixed income securities, and generally stable markets.
UBS Asset Management’s outlook is underpinned by a belief that the global trend towards low-risk investment will continue, given ongoing financial instability in the Eurozone and uncertainty surrounding the US debt problems, exemplified by the current ‘fiscal cliff’ negotiations.
“The current economic climate makes fixed income a more attractive asset class,” Anderson said.
“Risk aversion has increased across the board – in response to volatility and capital charges – and I do not see that changing in the short to medium term.”
Reflecting on 2012, Anderson confessed it had been a “good year for fixed income people,” singling out two recent mandates awarded to UBS Global Asset Management with a combined value of $2.8 billion as evidence of the spoils.
