ABX Weekly 29th August 2018 Market update

  • The S&P has broken out to a new high yet the VIX, the so-called fear index, is hovering significantly above its 52- week lows suggesting elevated uncertainty as the large-cap index continues to carve out new records
  • We have seen good buy flows in CNI 2021, NXT 2021, SYDAIR 2030 with inventory running low due to demand. Also dealt in the newly issued Commerzbank 2028 for long-term investors
  • Investment Grade Corporates continue to borrow at extremely low levels. Today’s example is Optus launching a 5yr bond yielding at indicative pricing 3.50%

Focus on AUD:

AUD/USD dipped from 0.7360 to 0.7240 last Thursday on political instability with the Government leadership up in the air retracing its losses on Friday when Scott Morrison was announced to lead the Liberal Party and the new Prime Minister. Aussie may consolidate ahead of the next Reserve Bank of Australia meeting on September 4th as the central bank is widely expected to keep the official cash rate at the current record low.

Political headwinds may continue to drag on the Aussie as the ongoing shuffle within parliament limits the RBA’s scope to normalise monetary policy.

Swiss Desk:

German business confidence improved more than expected, with an iFO Index reading of 103.8 in August, up from 101.7 in July. This positive surprise was mainly because the US does not levy any further trade tariffs on German cars for the time being.

France lowered its 2019 economic growth forecast from 1.9% to 1.7% and unveiled plans to cut public spending to remain within EU budget commitments. On the other hand, comments from one of Italy’s deputy Prime Ministers that the government might breach the EU’s 3% cap on public deficits if the country needed to finance social spending lead to upward pressure on the yield of the Italian 10-year government bonds.

The European Central Bank reported that YoY growth in Eurozone money supply M3 eased to 4% in July from 4.5% in June, missing the expectations for 4.3% growth.

ABX Colour:

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