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Category: Education

The Bank Bill Swap Rate: Disconnected From RBA Cash?

In our previous post, we discussed the potential impact that a falling interest rate environment falling interest rate environment may have on AT1 hybrids valuations. To summarize that article, BondAdviser does not believe an RBA cash rate cut will have too dramatic an impact on hybrid valuations. Further to this discussion, it feels prudent to…Read More

AT1 Hybrids in a Falling Interest Rate Environment

If you have been keeping up to date with comments about and from the Reserve Bank in 2019, you have almost certainly heard speculation about a possible cash rate cut.  Though the RBA has stated that the cash rate is ‘expected to remain unchanged for a considerable period’, the February shift to a ‘more evenly…Read More

Absorbing the Possible Blow to Imputation Credits

It would be safe to assume that popular search engines have witnessed a dramatic increase in ‘franking credits’ inquiries since the Leader of the Opposition divulged his party’s proposed changes to the scheme a year ago.  Whilst there is still water to go under the bridge on that front, the popularity of Australia’s dividend imputation…Read More

The Value of Independent Research

In the current unsettled times, with the financial and banking sector braced for more active and aggressive regulators and possible sweeping changes to operating models, the issues associated with reliable investor information and recommendations appear more relevant than ever. It is not that transparency from issuers is being brought into question, though it seemingly is.…Read More

A Lesson in Capital Structure & Pricing – AMP

As we reach the middle of Q1 2019, with reporting season well underway and Commissioner Kenneth Hayne’s final report has been thus far absorbed by financial markets, it appears that credit fundamentals remain broadly intact. Now is a good chance to review the current conditions in credit markets and understand the risk and return characteristics…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

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