ABE Weekly 06/09/2020

Market Update  

“Be so good they can’t ignore you” – Steve Martin 

The new world order of Government control and Central Bank intervention continues across the markets! The FT reported this week that FX is now becoming the new playground for bond traders given central banks have continued selling free puts, strongly reducing trading opportunities in fixed-income markets.

As we all remember, bond markets went into meltdown at the height of fears over the pandemic in March, as even the safest government debt succumbed to a sell-off – the chart below (Bloomberg) illustrates the dramatic jump in volatility which at the time opened up some great trading opportunities. However, central bankers’ drastic actions restored order and reduced volatility dramatically. This dramatic move to control the yield curve on the other hand has led traders to bet that policymakers would seek to control bond prices for years to come and dramatically reduce trading opportunities – whether they’ll be able to remains to be seen. The bottom line is, that despite trying to control bond prices, investors remain desperate for yield suggesting any further volatility should be a trading opportunity.

In our last weekly we reported that Perenti (mining services) had come to market to raise approx $200m in Medium Term Notes (MTN) however no sooner than we had gone to print the company decided not to proceed with the issue citing a lack of volume interest in the note. Given the lack of available product in the market it was not only unexpected but disappointing that the deal didn’t get away.

We have again been very active in bonds of NEXTDC Fixed Jun 2021 and the Centuria Fixed April 2023 both with Yields to Maturity of around 5%  a great return with a solid credit.

We are also very proud to be launching a new issue inPallas Trust Fixed Rate 7.5% Jun 2024 Bond which is soon to be released to the market – we expect this issue to be widely in demand. For more information regarding this issue and other opportunities please contact ABE.