The nations $3.4 trillion superannuation sector is forecast to become a “significant” buyer of Australian government bonds as higher interest rates and slowing global growth spur funds into fixed income.
Several super funds have or “intend to increase their allocation to fixed income because of an expected global growth slowdown and concerns over the liquidity risk of some growth assets in a more volatile market”, a new Australian Office of Financial Management report says.while the AOFM said domestic fund managers were big buyers of a recent $14 billion, December 2034 bond sale held last week.That bond issue offered investors a yield of more than 3.
The report said demand from super funds would be fuelled from rising retirement savings, changing risk preferences from an ageing population, and increased consolidation in the superannuation sector.
But some investors remain cautious on bonds, which could lose further value if inflation remains high. Investors are awaitingthat will help guide the Reserve Bank of Australia on whether higher rates are needed to suppress elevated cost pressures.
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