Yields with a 7 in Front of Them: Daintree's Justin Tyler on the "Exciting" Time for Fixed Income

Why It Matters

Floating‑rate, low‑duration bonds now deliver equity‑like returns with lower risk, reshaping portfolio construction for income‑focused investors.

Key Takeaways

• RBA likely to raise rates in June, ending tightening cycle.
• Floating‑rate strategy gives Daintree higher yields as cash rate climbs.
• Tax changes align capital gains and income, boosting after‑tax bond returns.
• Duration risk is less defensive post‑COVID; Daintree limits long‑duration exposure.
• Active credit management essential to avoid defaults like Credit Suisse.

Summary

Justin Tyler of Daintree explained why the current macro environment makes fixed‑income especially attractive, highlighting the Reserve Bank of Australia's likely June rate hike and the lingering inflation pressures exacerbated by the Iran‑related oil shock.

He noted that Daintree’s floating‑rate focus translates rising cash rates into higher running yields, with many investment‑grade bonds now offering "seven‑handle" yields that rival equity expectations. Proposed tax reforms that bring capital‑gains and income treatment closer together further improve after‑tax returns for bond investors.

Tyler cited concrete examples: the firm sold Credit Suisse bonds months before the default, and he warned against DIY bond picking after the Lehman and Virgin Australia failures. He emphasized that coupon income provides a buffer against price drops, making the return distribution more resilient, especially for retirees.

The takeaway for investors is to tilt toward floating‑rate, low‑duration fixed‑income assets managed actively, rather than relying on traditional 60/40 portfolios heavy in long‑duration bonds. This approach offers comparable pre‑ and post‑tax returns to growth assets while reducing volatility and credit‑default risk.

Original Description

Two confluent factors have left fixed income in its best spot in years and now offer investors returns comparable to long-term growth assets. That's the view of Daintree's Justin Tyler, who says there's now a "wealth of opportunities" in fixed income markets thanks to rising interest rates and the Budget's CGT changes making income investments more attractive.

Here, he details why investors need to be paying attention to fixed income, as well as the risks to avoid to make sure they're maximising the opportunity.

Time codes

0:15 - Inflation and interest rates

1:05 - Why now is a good time for fixed income

2:38 - The relative attractiveness of fixed income versus stocks

4:09 - Avoiding duration risk

5:26 - Interest rate risk

6:25 - The risks of going it alone in fixed income

8:43 - The importance of adaptability