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Global listed property started the year followed by Credit Suisse, saw extreme
strongly however rising rates and fears of volatility with yields moving at times 40- 50
banking contagion reversed the earlier basis points within days. The MOVE
gains, as the latter raised serious Index, which tracks market volatility in
concerns that tighter financial conditions bonds, reached levels not seen since the
could make commercial real estate GFC.
refinancing extremely difficult. The During the quarter, the Fed Reserve
benchmark index still managed a positive raised its Funds Rate from 4.25%-4.50%
unhedged quarter return of (+2.94%), to 4.75%-5.0%, pushing borrowing costs
however this was significantly lower than to new highs since 2007, as inflation
broader global equities. All property remains elevated. The Bank of England
sectors remain under pressure as raised rates a total of 0.75% to end the
recession and fears of a credit crunch quarter at 4.25% whilst the ECB followed
keep growing. suit with two hikes of 50 basis points
The infrastructure sector continues to elevating their current bank rate to 3.50%,
benefit from its defensive characteristics, levels not seen since 2008. On the other
but also the positivity from being exposed side of the coin, the People's Bank of
to secular themes, including broader China (PBoC) kept its key lending rates
reopening, years of underinvestment, and steady for the seventh straight month,
the energy transition. The energy holding firm on not providing any major
infrastructure and electric utility sub- stimulus just yet. Meanwhile, the RBA also
sectors lead the way, with airports and took its official cash rate to 3.6%, raising in
user-pay assets such as toll roads also both its meetings by 25 basis points.
performing strongly, especially in Europe, Whilst the level of increases has slowed,
as pent-up demand from travel drove all remain cautious and ready to re-
prices. accelerate the pace of hikes should
inflation persist.
The FTSE Global Core Infra 50/50 index
(unhedged) bounced back in March to end The 10-year Australian Treasury yield
the quarter up (+2.0%). The hedged started the quarter at 4.05%, trading to as
equivalent fell (-0.17%) as the AUD low as 3.19% before ending the quarter at
suffered further relative losses. 3.24%. An overall fall of 0.81%.
Bonds and Cash The 10-year US Treasury yield started the
quarter at 3.88%, and whilst briefly hitting
Global bond markets started the year very above 4% in early March, dropped to as
much on a positive note (bond yields
continued to fall) following a volatile low as 3.29% in mid-March before ending
the quarter at 3.49%.
December quarter as sentiment rose off
the back of the reversal of China’s zero- Australian bonds (Bloomberg AusBond
covid stance and increased optimism on Composite 0+Yr) provided a healthy return
the global growth outlook. Central banks of (+4.60%) whilst Global bonds
kept raising rates, albeit in smaller (Bloomberg Global Aggregate TR
increments, with inflation starting to abate Hedged) returned a solid (+2.38%). Both
as energy prices fell, supply side issues indices rising strongly as yields came
improved, and higher interest rates began roaring back in.
to impact consumption.
Most currencies continued to appreciate
After continuing to stabilise in January with against the US dollar during the quarter.
further rises in bond prices (falling bond The AUD peaked to close to 0.71 in
yields), February saw all gains given back January before easing down to 0.66 by
as higher than expected inflation readings quarter end, due to a combination of risk-
and ongoing labour market strength off trading (negative AUD) and interest
resulted in sharp rises in bond yields. rate differentials (favouring foreign
Yields rose into March, however, the currencies).
collapse of SVB and Signature Bank,
