ABX Weekly 10th October 2018 Market update

  • The S&P is still flirting with all-time highs as the index remains in a bullish channel still within spitting distance of all-time highs. With no sign of exhaustion, it seems the only way is up…. for now. But I am getting nervous!
  • We have seen good buy flows in CNI 2021, NXT 2021, SYDAIR 2030. We have sold out of the rare SYDAIR 2030s with still demand for more. We picked up some CNI FRN 2021 for that extra yield
  • Investment Grade Corporates continue to borrow at extremely low levels. Today’s example is NAB launching a 5yr bond pricing at 3.265%

Focus on AUD:

The Aussie popped above the 0.7200 handle last night with rising equities helping, despite US-China tariffs ramping up yet another notch and domestic political turmoil. The Reserve Bank added little of note yesterday in the minutes of its last meeting, once again stating “the board agreed that there was no strong case for a move in interest rates in the near term and that the next rate move would likely be up if the economy developed as expected”. They also stated the obvious, commenting that the U.S.-China trade tensions were a “material risk” to their outlook.

European Desk

European shares shuddered, then recovered, on Tuesday after Beijing retaliated with new tariffs on $60 billion worth of U.S. goods, less than 24 hours after U.S. President Donald Trump imposed 10 percent tariffs on an additional $200 billion worth of Chinese imports. In primary bond markets, sales have surpassed EUR20 billion for a third straight week so the corporate bond market continues to perform well.

ABX Colour:

Markets moved on from the latest US-China tariff escalation, adopting a more risk-positive tone overnight. Market is pricing in 100% of the Fed hike in September for the US and 80% for another one in December rising bond yields to their highest since May. Floating rate bonds are an excellent way to capture these market movements and have an increasing coupon payment. We have some rare Centuria 2021 Floating Rate bonds which yield higher than the fixed rate.

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Have more certainty on your investments here ABX weekly 19/09/2018

 

ABX weekly market insights

 

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