Halister News

(Bloomberg) -- Australia’s bond market is “sowing the seeds of its own undoing as an asset class,” Andrew Canobi, director for Australian fixed income at Franklin Templeton, writes in note received Wednesday.

• Cites modified duration of Bloomberg AusBond Composite Bond Index rising to a fresh record of 4.9
  • Duration has increased as govt issuance escalates, average tenor lengthens and yields decline
• As yields plumb ever lower depths, maturing bonds are being refinanced at lower coupons
• Sees possible combination of very long duration, very low rates and very little coupon
• “With RBA cutting to 1.75% and good reason to believe there is more to come, the party can continue for a while yet,” Canobi writes. “But this is one where overstaying one’s welcome will result in one mighty hangover.”