Amid Dollar Weakness…BoA: "Australian Government Bonds to Benefit Most in the 'Post-Dollar' Era"

BoA has advised global investors to pay attention to Australian government bonds.

According to Cryptopolitan on the 23rd (local time), a BoA bond market report forecasts a large inflow of funds into the Australian bond market and a rise in prices. The report notes, "The Australian bond market is small in scale and may see high price volatility if global capital flows in," and predicts, "If the move away from dollar assets accelerates, Australian government bonds will be the biggest beneficiaries."

This trend stems from weakened investor confidence in the dollar, due to President Donald Trump’s fiscal management style and policies of economic nationalism. This year, the U.S. Dollar Index (DXY) has fallen about 9%, marking the sharpest decline in a decade. In addition, a recent international fund manager survey by BoA found that 86% believe the dollar will depreciate within the next year.

As expectations of a weaker dollar spread, currencies and bonds of non-dollar economies with abundant natural resources and strong fundamentals, such as Australia, are emerging as alternatives. The yield on Australian 10-year government bonds is currently 4.24%, not much different from that of the United States (4.43%), but BoA predicts the interest rate gap will widen to 0.75% points by 2026.

The report also stated, "Demand from Australian pension funds and central banks, as well as easing banking regulations, will support Australian government bonds," adding that "the share of the Australian dollar in global foreign exchange reserves has doubled over the past decade," highlighting the strength of Australian bonds.