Australian superannuation funds will gradually shift their portfolios more toward bonds as people retire and demand regular income and less risk from their investments, says Pacific Investment Management Co.

Australian bonds will continue to attract foreign investors who hold about 80 per cent of Commonwealth bonds, says Robert Mead, a Pimco portfolio manager.

Australia’s net debt to gross domestic product is less than 10 per cent. Its triple A credit status has made it a favourite of sovereign debt buyers.

Yields on Australian bonds are “fair,” says Mead, although they may rise and fall 50 basis points in the months ahead because of concerns about southern European economies.

“Sentiment is so fragile,” says Mead.

Expectations the Reserve Bank of Australia may cut rates on as many as four occasions in the next 12 months are reasonable, he says.

Still, US government bonds remain attractive to investors who seek “shelter” from financial storms, says Ramin Toloui, a Pimco portfolio manager.

Toloui believes the US presidential election campaign will have little effect on markets.