Author: Jack

Term Deposit Review – January 2019

January proved to be a solid start for markets in 2019 as a softening in the Fed’s rhetoric and strong(ish) Australian CPI data encouraged sentiment. Fed Chairman Jerome Powell announced the Fed would be “patient” on any future rate changes and signalled flexibility in its balance sheet normalisation policy, which tempered volatility for the time…Read More

Welcoming SONIA: The New Benchmark Rate replacing LIBOR

ANZ’s (ASX: ANZ) issuance of £740 million (~A$1.35 billion) on 11 January 2018 represented the first non-UK bank to launch a SONIA-linked covered bond.  The competitive and sizeable issue signifies the emergence of the Sterling Overnight Index Average (SONIA) as an appropriate replacement of the London Interbank Offered Rate (LIBOR) for all issuers. Following the…Read More

How are Stocks and Bonds Correlated?

Historically, bonds and stocks move inversely to each other, and while this hasn’t always been the case, this relationship has held in recent years. However, as with most rules, it is not without exceptions. Broad macroeconomic conditions factor into the Reserve Bank of Australia’s (RBA) decisions on the RBA Official Cash Rate and affect investors’…Read More

What Causes a Yield Curve Inversion?

A key concept in all finance is the time value of money.  Investors are generally increasingly compensated for lending their money for longer periods of time (assuming same inherent credit risk) with higher returns as demonstrated above in figure 1 below. Figure 1. Australian Swap Curves – Beginning & End 2018 Source: BondAdviser, Bloomberg However,…Read More

GE & AMP: Case Studies in Tactical Investing

In April this year, the Banking Royal Commission prompted the first large company scalp with the resignation of AMP’s (ASX: AMP) CEO Craig Meller.  Mr Meller’s resignation followed revelations of serious misconduct by the institution for almost a decade and capped off a week in which its failures were brutally and publicly exposed. A few…Read More

Term Deposit Review – November 2018

An eventful month for financial markets saw initial de-risking globally with late dovish sentiment clawing markets back to an even position. Emphasised commentary centred on rates, oil, politics, leverage and earnings. APRA took centre stage with its announcement of TLAC reforms which we discussed in detail in our November 2018 Monthly Market Review.  We view…Read More

Has APRA just Gold-Plated Hybrid Instruments for Australian Pensioners?

On 8 November 2018, the Australian Prudential Regulatory Authority (APRA) announced its long-awaited proposal (a discussion paper) on Increasing the loss-absorbing capacity of ADIs to support orderly resolution.  We previously discussed what the proposed changes could be as far back as April 2017, when we looked at the potential for “Tier 3” regulatory capital introduction…Read More

RCR Tomlinson: A Lesson in Project Risk

The collapse of engineering group RCR Tomlinson (ASX: RCR) into administration on 23 November capped a remarkable fall for one of the oldest engineering contractors in the country.  However, whilst the appointment of administrators, that are set to carve up and sell off parts of the ailing business, surprised many in the market, company collapses…Read More

What Causes Bond Market Illiquidity?

Liquidity is an important consideration for any investor, whether it be in equities, fixed income or alternative asset classes. Liquidity is the degree to which an asset or security can be readily bought or sold at a mutually agreeable market price, and this visible by the trading volume of a given security, with a higher…Read More