According to one leading investment manager, the U.S. 10-year treasury bond yield could rise 1 percentage point by the end of 2018 to take it as high as 3.75%.
Patrick Armstrong, chief investment officer at Plurimi Investment Managers, told CNBC that robust wage growth and tightening monetary policy would be the catalyst for this widening.
If this prediction were to prove accurate it would almost certainly put a lot of pressure on the AUD/USD cross, potentially pushing it below the 70 U.S. cents mark once again as the yield spread widens.
This would be great news for Australian companies generating meaningful revenue in the United States as they are likely to be given a boost from favourable currency movements.
Three which I expect to benefit are listed below:
Appen Ltd (ASX: APX)
Appen generates the vast majority of its revenue from the U.S. tech sector, meaning its financial performance can be impacted significantly by the weakening or strengthening of the Australian dollar. This year the high-quality, human annotated datasets provider expects to achieve the top end of its full-year EBITDA guidance range of $50 million to $55 million guidance range. This would mean EBITDA growth of 95% year-on-year. However, this guidance was based on an average AUD/USD of 80 U.S. cents. The weakening currency could potentially put Appen in a position to outperform its guidance.
Integrated Research Limited (ASX: IRI)
Integrated Research is an underappreciated tech star with significant exposure to the United States. Its performance monitoring and diagnostics software solutions for business-critical computing environments are increasingly popular in the country and are being used by all ten of the largest U.S. banks. This meant that in the first-half approximately 69% of its revenue was generated in the Americas region.
Nanosonics Ltd (ASX: NAN)
Nanosonics is a leading hospital disinfectant equipment business which has approximately 14,100 or 88% of its trophon EPR installed base in North American hospitals. The good news is that despite this large market share in the region, management estimates that its addressable market for the trophon EPR product is a total of 40,000 units in North America. I think this market opportunity, the launch of similar products targeting currently unmet needs, and currency tailwinds could further boost the revenue generated in the region in the coming years.
