Sam Watkins

Overall, I think our answer is yes.

Eventually, we will need to see some level of fiscal sustainability reassert itself because of the higher cost of debt.

Ultimately, when there's a reaction that you might see through the bond market, the bond market vigilantes, as I think some people would call them, or when that gets translated through to voter sentiment.

So, you know, it's interesting.

Often the bond people at the party are seen as being the doom and gloom, uh,

So we're out here afraid of our shadow.

We've called five of the last three recessions.

That's our reputation.

So I'm glad to be making you feel a little bit better.

You're changing it.

You're changing it.

So there's three things that we think people need to keep in mind at the moment when considering fixed income.

The first one is that the current high level of rates is doing a lot of work in terms of driving the return.

Now, what do I mean by that?

Well, what I mean by that is that for a highly rated portfolio of Australian bonds currently, you can receive a yield that starts with six.

So somewhere between six, six and a half percent, somewhere in that range.

If you step outside of that and look globally, you can move to as high as seven, seven and a half percent as an expected return.

And this is all versus the current Australian cash rate of 4.35%.

So I'd start with the high level of income is doing a lot of the work.

Second thing I'd say is that given where starting rates are, if we were to see an accident, if we were to see deterioration in growth and we were to see a recession occur, either in Australia or in other parts of the world, bonds will be a defensive part of an investor's portfolio.