“There is a degree of caution as the RBA moves too hard, too fast” Mutual Limited CIO Scott Rundell answers the top questions financial advisers are likely to receive from clients concerned about interest rates rises.
As the RBA hikes rates, Bank Bill Swap Rates (BBSW, a reference rate) move higher, often ahead of the RBA moves. All securities held in Mutual’s funds (except the Mutual Cash and Term Deposit Fund - MCTDF) are floating rate notes, whose coupons are set as a fixed margin to BBSW and every 30 days or 90 days, their coupons are reset.
So, if the RBA is hiking, and BBSW is hiking, the coupon and running yield of Mutual’s funds generally go up with it. With MCTDF, the term deposits are closely aligned to BBSW, and can be expected to increase as well.
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