Quality meets yield: The case for Australian bonds

Source: Bloomberg, August 2026

Australian made, globally trusted

Demand for Australian bonds is deep and diverse, with a resilient buyer base throughout economic cycles. Domestically, superannuation funds continue to lean on fixed income as portfolios mature and members move closer to retirement, while banks, insurers and other institutions hold bonds for the stability and regulatory certainty they provide. Internationally, Australian bonds also attract investors as a natural destination for global capital seeking high-quality fixed income exposure.

Australia’s stable political environment, favourable economic backdrop supported by strong population growth, and relatively restrained public debt levels compared with key developed market peers¹ attract investors seeking a secure and liquid source of portfolio diversification. Combined with the yield advantage Australia has historically offered, offshore ownership of Australian Commonwealth Government Bonds has increased by 12x over the past 2 decades, providing an attractive source of diversification within global portfolios. This combination of steady domestic buying and growing global appetite is a large part of why Australian bonds remain a resilient corner of the global fixed income market, even as conditions elsewhere shift.

Chart 2: 12x increase in offshore ownership of Australian Commonwealth Government Bonds in past 20 years¹

Source: Bloomberg, AOFM, March 2006 - March 2026

Why active management matters

The case for passive investing rests on assumptions that don't hold up in Australian bonds. In equities, broad indices, transparent pricing and low-cost replication mean passive investing can play a valid role in portfolios. The Australian bond index (Bloomberg AusBond Composite Index) looks nothing like this: almost 80% government debt, concentrated in a handful of issuers, and traded over the counter rather than on an exchange. Tracking it doesn't buy diversification - it buys a narrow, government-heavy exposure that leaves little room to capture where the market is actually offering value. In contrast, as the market moves, active managers can respond; adjusting duration as rate expectations change, rotating between sectors as relative value emerges, and managing credit exposure through periods of stress rather than simply holding it.

For investors seeking access to Australian bonds, active fixed income ETFs can deliver the best of both worlds: professional management plus the structural advantages of ETFs – intraday liquidity, greater holdings and pricing transparency, and easier access.

Accessing Australian bonds on the ASX

The Macquarie Core Australian Bond Active ETF (ASX:MQFI) provides a core active bond exposure at a cost-effective fee. It has been designed to provide access to quality income from some of the highest rated bonds in the world with diversification against equity market risk for portfolio defence. Importantly, for fee conscious investors, the base management fee of just 0.09% p.a. is aligned with a passive-like management fee and a performance fee is charged only when we beat the index*. This gives investors access to a strategy designed to outperform, with a performance fee that is only payable when active management delivers real value above what the index provides.

*The performance fee is 20% of the cumulative outperformance of the Fund (after the management fee and expenses) above the return of the index, subject to a high watermark. Other costs apply, which may vary from year to year. Refer to the Product Disclosure Statement for any indirect costs, expense recoveries or underlying performance fees (if any).

Important information

The Target Market Determination (TMD), available at macquarie.com/mam/tmd, includes a description of the class of consumers for whom the Fund is likely to be consistent with their objectives, financial situation and needs.