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Hedge Clippings | 25 September 2026 Bond markets take most of the focus this week. The US 10-year Treasury yield pushed back to levels not seen since before the GFC, Australia's unemployment rate climbed to 4.6% despite employment increasing, and ASIC sharpened its warning to private credit managers. All of which sets up an interesting RBA meeting next Tuesday. Five per cent wasn't the ceiling: The US 10-year keeps climbing The US 10-year Treasury yield reached 5.20% on Thursday, its highest level since 2007, while the 30-year Treasury climbed to 5.48%, its highest since 2004. The move reflects a fairly uncomfortable combination of resilient US growth, inflation concerns, higher energy prices and government borrowing. It has also been part of a wider global bond sell-off rather than an isolated move in US markets. The reason the 10-year matters is that it is one of the main reference points for the global cost of money. When investors can receive around 5% lending to the US government, borrowers elsewhere have to compete with it. Refinancing becomes more expensive and investors expect greater compensation for taking additional credit, liquidity, or duration risk. It is also worth remembering that the Federal Reserve doesn't directly control this end of the market. The Fed can set overnight rates; investors ultimately decide what they are prepared to accept to lend money to the US for ten or thirty years. For most of the post-GFC period, markets became accustomed to unusually cheap money. That era is looking increasingly distant. Five per cent was supposed to be the scary number. The bond market seems to have decided it was more of a speed bump. Yields at these levels are proving a headache for Donald Trump, adding to what was a difficult week for him. His man at the FED has just raised rates against his wishes, US debt now stands at US$40 trillion, and has increased by $2.5 trillion over the past 12 months. If, (and it's a big IF) he wins the upcoming mid-term elections, his promise of $5,000 per adult is estimated to add another $1.2 trillion to next year's figure, adding further upward pressure on bond rates and further juicing up inflation. Elsewhere for Trump, his attempt to silence some of his media critics failed, firstly by a rare show of solidarity from his traditional media supporters, and then by the courts declaring his move unconstitutional. His rambling address to the UN General Assembly lasted almost 40 minutes (the average by his peers is around 15 minutes, and Albanese's earlier this morning lasted 19 minutes) focused on the war with Iran which he started, more than the war in Ukraine which he promised to stop. Both are driving global inflation, which will increase further if he follows through on his threat to limit US diesel exports. ASIC tells private credit the clock is ticking Private credit was back in the spotlight on Tuesday when ASIC Commissioner Simone Constant delivered the keynote address at CAFBA's Commercial Property & Development Finance Summit in Sydney. Her message wasn't particularly subtle: the "clock is ticking". Constant said ASIC is beginning to see the first significant cracks emerge as weaknesses in parts of the sector are tested under tougher conditions. Bathla is the obvious recent example, with 40 private credit funds reportedly exposed to the failed developer to the tune of 3.4bn. ASIC's concerns go considerably further than one borrower. Its review of 28 private credit funds found only four published information about the interest rates or ranges charged to borrowers, fewer than half had detailed written credit, impairment and default-management policies, and only two of the wholesale funds conducted stress testing as part of liquidity-risk management. For a sector ASIC estimates has grown around 500% over the past decade, the regulator's view is that governance, controls and underwriting standards haven't always kept pace. Constant described it rather neatly: parts of the sector have tried to "run before it could walk". Bathla also demonstrates why treating private credit as one homogeneous investment strategy isn't particularly useful. Concentrated lending to a property developer carries very different risks from diversified residential mortgages, corporate lending, medical finance or other asset-backed credit. The label tells you the broad sector, but not the underlying asset class. The loan book - if you can see it - tells you where the risk actually is. Unfortunately, and unhelpfully, the "private credit" label is being used too widely when not all private credit is the same, nor represents the same risk, even though ASIC's general warnings about reporting, valuations, terms and fee transparency are real. Australia added jobs and unemployment still rose. Both can be true. Australia added 39,500 jobs in August, almost twice market expectations, but unemployment still rose from 4.5% to 4.6%. The apparent contradiction is mostly explained by more Australians entering the labour force. Participation increased to 67.1%, meaning employment rose but not quickly enough to absorb everyone looking for work. There was some softness underneath the headline number. Part-time employment rose by 45,800 while full-time employment fell by 6,300. On the other hand, hours worked increased 0.7%, and underemployment edged down to 6.2%. So the labour market is loosening, but it is hardly falling off a cliff. Which leaves the RBA with a problem. The Board meets for 2 days on Monday, with its rate decision due at 2.30pm on Tuesday. The cash rate currently sits at 4.35%, while inflation remains stubbornly above the RBA's 2-3% target and Governor Michele Bullock has warned that some further upside inflation risks appear to be materialising. The Board therefore has evidence of a gradually cooling labour market on one side, and persistent inflation, elevated energy prices and rising global borrowing costs on the other. There is one more complication: the ABS releases the August 2026 CPI at 11.30am next Wednesday, less than a day after the RBA announces its decision. Nothing like making the rate call on Tuesday, and getting the inflation update on Wednesday. As usual, the explanation for the decision may prove just as interesting as the decision itself. With almost 100% of the market, and all the major banks expecting a hike of 0.25%, it is unlikely there will be any surprises, just further pain for borrowers, and pressure on the real estate market. No doubt Jim Chalmers, and Albo on his return from the UN, will have plenty of reasons to deny any responsibility. News | Insights Market Commentary | Insync Fund Managers August 2026 Performance News Bennelong Long Short Equity Fund |
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