How FIIG clients earned 9.08%** investing in direct bonds in
FY 2025
At FIIG, we are often asked how it is possible to generate an annual return of 9.08% when, in a balanced bond portfolio, the average investment-grade quality bond yields around 6%. With the support of a dedicated FIIG relationship manager and taking advantage of the various strategies and market conditions available, 99% of FIIG investors received a return above 5.8%, and the median return at 9.08% in FY25**.
So what's driving these returns?
We further look into the factors that provided these enhanced returns for investors.
Credit Spreads Tightening
Credit spreads have been tightening, causing gains for bondholders. This fall in credit spreads triggers a rise in the capital price of the bond.
Actively Trading
Active trading allows investors to capture short-term opportunities in the market, not only entering new trades, but also exiting bonds to maximise returns.
New Issue Premium
Participating in new issues allows bond investors to capture the “new issue premium”, where bonds have a higher yield at first issuance than other comparable bonds.
High Yield
The high yield market continues to provide an attractive investment for investors on a selective basis, rewarding bond investors for the additional risk.
Currency Diversification
An allocation to non-AUD denominated bonds provided bond investors with better returns and additional diversification.
Opportunities for bonds in FY26
RBA easing cycle continues
As the cash rate falls, the need for better returns and a stable income becomes even more critical to supplement other asset classes that provide a much lower return.
Ongoing uncertainty
The pace and scale of central bank rate cuts remain unknown, and ongoing US tariff and geopolitical risks are set to continue; however, a well-constructed and actively traded bond portfolio will continue to provide stable and improved returns.
Yield curve movement
Further expected rate cuts and US Government spending has created a steeper yield curve, which we believe is set to continue and create opportunities to enhance portfolio returns.