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Hedge Clippings | 17 July 2026
Two housing stories moved in opposite directions this week: buyers are paying less, and renters are paying record amounts. Bond markets are betting the RBA is done hiking even as the RBA's own language says otherwise, and in the US, a soft June CPI figure met a new Fed chair unwilling to claim victory. At the end of this issue: a first look at our FY2026 Fund Manager Review, due for release on Monday. Rents hit record highs, Sydney posts its strongest quarterly jump in four years: Domain's June Quarter Rent Report, released 9 July, showed combined capital city house rents up 2.9% for the quarter and 7.7% year on year to a national median of $700, the fastest annual pace in almost two years. Sydney recorded the sharpest move, rising from $800 to $850, a 6.3% jump that Domain's Nicola Powell called the strongest in four years. Brisbane hit a record $700. Unit rents grew just $5 for the quarter, widening the gap with houses. Regional rents held flat despite 5.3% annual growth, so this is a capital city story. Australian Finance Group's James Redman flagged the underlying risk: Negative gearing changes already apply to established property bought after 12 May 2026, even though the law does not commence until 1 July 2027. With vacancy rates near record lows, any further pullback in investor purchases of established stock, exactly what the reform intends, could squeeze rental supply further. Coupled with the ongoing effects of 3 rate rises, the government's policies aimed at cooling investor demand for established property to help first home buyers can also shrink the rental pool in the short run, since today's rental is often tomorrow's first home. Watch new build approvals and rental yields closely. Yield compression is the release valve here, not a supply fix. Bond yields fall as markets bet the hiking cycle is over: Australian government bond yields fell across the curve this week. The three year Commonwealth bond yield dropped 11 basis points to 4.36%, and the 10 year yield fell the same amount to 4.72%, per Fixed Income News Australia. Ten year inflation linked yields eased 10 basis points to 2.28%, suggesting bond investors see the RBA's tightening cycle as largely done, even though the RBA's own minutes, released the week before, kept the door open to further hikes. Against that backdrop, RBA Assistant Governor Sarah Hunter delivered a research paper on 9 July examining how central banks assess supply shocks, timely given recent oil volatility. Her remarks sit alongside the Productivity Commission's Chair Danielle Wood's view that weak business investment and slow technology adoption have capped productivity growth since the GFC, meaning less capital per worker and a lower speed limit for non-inflationary growth, an argument for caution given the inflation fight has been far from won at this point. The market and the RBA are reading the same data differently - again. Falling yields say cuts are coming, the RBA's language says hikes remain possible. Watch the 29 July CPI release as the real tie breaker, with the next RBA decision due 11 August. US inflation cools sharply to 3.5%, but Fed Chair Warsh refuses to declare victory: The US June CPI report released this week showed headline inflation falling 0.4% for the month, the largest drop since April 2020, pulling the annual rate to 3.5% from May's 4.2% and below the 3.8% consensus. The move was driven by energy, down 5.7% for the month on the US-Iran de-escalation, though the energy index remains up 15.7% year on year. Core CPI was flat for the month and eased to 2.6% year on year, also softer than expected. Fed Chair Kevin Warsh pushed back on a premature victory lap, saying mission accomplished is not his view. Markets still raised expectations for a second half rate cut, and equities rallied. One month of energy driven disinflation right after a de-escalation of hostilities is not a durable trend, especially with the Iran situation currently is in danger of reversing. A single soft number does not make a cutting cycle, particularly with the supply side inflation that is backed up in the pipeline. FY2026 Fund Manager Review - one theme decided FY2026, then started giving the gains back: Fund Monitors' Annual Fund Manager Review, covering 18 peer groups and over 1,000 funds' returns to 30 June 2026, reveals a year that rewarded one theme almost completely: Every one of the ten strongest FY2026 results carries concentrated gold, resources, or high conviction long short exposure. The June quarter retraced much of that leadership, so the league tables already reflect a turning theme. Geographically, Australian large cap funds returned an average of 2.22% against an average of 11.14% for global large caps, a gap of 9% that made regional allocation the year's most consequential decision. The variance was hardly surprising given the ASX200 Total Return was 2.77% in the 12 months to June, compared with the S&P500's Total Return of 22.33%. The full review covering the 10 top performing funds in each Peer Group, along with commentary and analysis, will be available online at www.fundmonitors.com from midday next Monday. If you would like a copy emailed to you directly, please email your request to [email protected]. News | Insights Why a softer June CPI may not mean the RBA is finished | Seed Funds Management Infrastructure in focus: A hard-wearing HALO in infrastructure | Magellan Investment Partners June 2026 Performance News Insync Global Capital Aware Fund |
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