Education.

21 Mar, 2019

The Bank Bill Swap Rate: Disconnected From RBA Cash?

By |2019-03-21T04:17:46+11:00Mar 21, 2019|Education, Market Commentary|

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 explore movements in the bank [...]

7 Mar, 2019

AT1 Hybrids in a Falling Interest Rate Environment

By |2021-09-24T10:43:35+10:00Mar 7, 2019|Education, Hybrids|

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 balanced’ stance on any cash [...]

7 Mar, 2019

Absorbing the Possible Blow to Imputation Credits

By |2021-09-24T10:43:35+10:00Mar 7, 2019|Education, Hybrids|

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 system as a discussion point [...]

21 Feb, 2019

A Lesson in Capital Structure & Pricing – AMP

By |2019-02-21T02:12:17+11:00Feb 21, 2019|Education|

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 of different areas of a [...]

20 Dec, 2018

What Causes a Yield Curve Inversion?

By |2021-09-24T10:43:35+10:00Dec 20, 2018|Education|

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, on rare occasions these yield [...]

20 Dec, 2018

GE & AMP: Case Studies in Tactical Investing

By |2021-09-24T10:43:35+10:00Dec 20, 2018|Case Study, Education|

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 months later in the USA [...]

6 Dec, 2018

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

By |2021-09-24T10:43:36+10:00Dec 6, 2018|Education|

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 in Australia. To the rest [...]

6 Dec, 2018

RCR Tomlinson: A Lesson in Project Risk

By |2021-09-24T10:43:36+10:00Dec 6, 2018|Case Study, Education|

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 in the construction industry are [...]

4 Oct, 2018

Quantitative Tightening: What’s Happening 12 Months On

By |2021-09-24T10:43:36+10:00Oct 4, 2018|Bonds, Education, Federal Reserve, Market Commentary|

Quantitative easing (QE) was first pioneered by the Bank of Japan (BoJ) way back in 2001, when it was employed as a stimulative economic policy, after the BoJ ran short-term rates down to zero.  QE’s mechanism for stimulation is the purchase of debt securities by central banks (in the secondary market), causing the central bank’s reserve supply to increase and [...]

20 Jun, 2018

To TLAC or Not to TLAC?

By |2018-06-20T22:42:24+10:00Jun 20, 2018|Case Study, Education|

It’s been over a year since we first commented in our article Will we see Tier 3 in Australia? about whether APRA could be contemplating a new Tier-3 capital class for the domestic big 4 banks. This would form the Australian response to the “Total Loss-Absorbing Capacity (TLAC)” regime being imposed on the world’s largest banks by international regulators. As [...]