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Mutual Daily Mutterings

Quote of the day…


“Weaseling out of things is important to learn; it’s what separates us from the animals… except the weasel.”…Homer Simpson








Chart du jour…two cartoons ‘coz it’s Friday




“Treading Water…




Overviewrange bound, waiting for payrolls…”

  • A modest risk on session across the board ahead of tonight’s US non-farm payrolls print.  The S&P 500 and NASDAQ once again notched all-time highs, buoyed by as factory orders beating expectations and US initial jobless claims falling to pandemic lows.  Oil futures rose again, to 30-day highs, as the US Gulf grapples with Hurricane Ida’s impact.  Treasury yields were little changed ahead of the jobs report.
  • Not a lot to add from my perspective today, I don’t have a strong feel for US payrolls, so will be channelling quite a few talking heads and other commentators.  Starting with Fed policy, this from Atlanta Fed President Raphael Bostic “we’re going to let the economy continue to run until we see signs of inflation,” before stepping in on rates.
  • Talking heads… “most market watchers aren’t expecting the US central bank to announce its taper plans until its November meeting at the earliest, a full three non-farm payroll (NFP) reports from now…nonetheless, traders will still key in on Friday’s big jobs report to see if the labour market is recovering as expected.
  • And this, from Goldman Sachs, via Bloomberg, a more bullish view…”the market is worrying too much about global cyclical risks from Delta outbreaks and China’s slowdown, and our Fed forecast is still more dovish than the market’s…so we think some further relief in cyclical assets — higher equities and higher bond yields — is likely over the near term.”  Near term, yes, further into year end and beyond, I’m less convinced.
  • And lastly, this one from Bill Gross (via his website), who sees lots of garbage out there in the investment world.  He predicts yields on 10-year Treasuries will climb to 2.0% over the next 12 months, handing investors a loss of roughly -3.0%.  Funds that buy them belong in the “investment garbage can.”  He also said stocks may fall into the same receptacle should earnings growth come in short of lofty expectations (my concern also). Cash has been trash for a long time, but there are now new contenders, according to the onetime bond king.


  • Offshore Stocks – modest gains across offshore markets, with all major indices flashing a spritely spring shade if green, although given inflated valuations and growing monetary policy uncertainty, there is scope for a pull back over the near term (1 – 3 months).  Nevertheless, three-quarters of S&P 500 stocks gaining and eight sectors advancing (and three retreating).  I suspect the weaker ADP print earlier in the week has given the bulls some confidence that the nonfarm payrolls tonight will be weaker than expected, which adds weight to the Fed holding fire a little longer on its tapering plans.  Energy (+2.5%) led the charge, with Healthcare (+1.1%) and Industrials (+1.0%) providing upside support.  At the bottom of the pool, it was Telcos (-0.7%) as the only sector really retreating, with Discretionary (-0.1%) and Tech (-0.1%) only just in the red.
  • Local stocks –a modest down day yesterday with little new news, other than the usual rubbish coming out of Spring Street or [INSERT STREET NAME OF RELEVANT STATE GOVERNMENT HERE].  The mix of uppers and downers was again relatively even, and more sectors were up than down, on a ratio of 6:5.  Materials (-2.5%) did the vast majority of the damage on the down side, mainly on account of BHP (-6.9%) going ex-dividend.  Healthcare (-1.1%), mainly Ansell, ResMed and CSL the culprits, while Staples (-1.0%) also had a down day.  Fighting the good fight we had Tech (+0.8%), Energy (+0.7%), and Industrials (+0.5%).  Futures are pointing to modest gains, +0.2%.


(Source: Bloomberg)



  • Offshore Credit – primary reasonably active, but nothing out of the box.  Spreads in secondary remain range bound, with movements in investment grade limited to a basis point in either direction over the week.  High yield continues to perform, with spreads grinding tighter.
  • Local Credit – traders….”a reasonably busy day with local primary issuance the focus for many. To date, the new deals that we have seen have not had any widening impact on secondary spreads, indeed the warm reception received by these deals has helped refocus eyes on some secondary market opportunities.”  On financials specifically…”we closed the curve unchanged but it certainly felt as though street inventories are starting to build. Sadly, we think spreads are likely mired in a very tight range for the medium term. We continue to see modest sell flow as accounts look to raise cash to redeploy in new issues, however, this is not of sufficient size to impact secondary spreads”. Themes remain unchanged for me, secondary spreads aren’t going anywhere short of a cataclysmic event, or rush of supply and we can’t position for the first, and the latter doesn’t look likely either.
  • Bonds & Rates – not a lot done in US interest rate markets overnight, waiting on US jobs data.  Expect today in local markets to be quiet also.


(Source: Bloomberg)



  • Offshore Macro – main event for the week, in a macro sense, is the US Non-Farm Payrolls.  This is an important report because the Fed is keen to normalize policy and its eyes are firmly focused on the job market over the inflation picture at the moment.  Expectations for a blowout number have moderated as Delta (the virus, not the airline) has taken hold across many states.  A second consecutive weak ADP number earlier this week added to this sense of caution.  Having said that, a low print could be just peachy if it keeps the Fed’s finger off the taper trigger and 10-year Treasury yields near 1.30%.  With record high US stocks, record-low real Treasury yields, and the search for yield in European junk debt, the last thing investors likely want is an out of the box, you little beauty non-farm payrolls number.  For the record, the Goldilocks figure is likely around 500k — not enough to worry, but low enough to keep Treasuries rallying and markets in a risk-on party mood.  Consensus estimates are at +725K vs +943K last month, although after the big ADP miss, eight forecasters published their nonfarm payrolls estimates, with an average of 593K — well below the 725K consensus. The unemployment rate estimated to fall to 5.2% from 5.4%.  Still on labour markets, US jobless claims fell to a pandemic low, dropping more than expected to 340K from the prior period’s 354K.  Continuing claims dipped to 2.7 million.
  • Local Macro value of new lending for residential was released yesterday with +0.2% MoM vs -0.2% MoM consensus (vs -1.6% MoM last month).  Some detail curtesy of CBA…”lending to first home buyers continues to fall sharply, down by a further 7.6% in July after a 7.8% fall in June. There are concerns that deteriorating affordability is impacting this segment of the market. Lending to owner occupier’s ex first home buyers rose by 2.4% and lending to investors was up by 1.8%. The latter is now at its highest value since the all-time high in April 2015. Regulators will no doubt continue to watch these figures very closely as well as the metrics around these loans.


Have a good weekend.



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Scott Rundell, Chief Investment Officer

T: +61 3 8681 1907



Mutual Limited Daily Update

Mutual Funds

MCTDF – Mutual Cash Fund
Gross running yield: 0.26%
MIF – Mutual Income Fund
Gross running yield: 1.40%
Yield to maturity: 0.74%
MCF – Mutual Credit Fund
Gross running yield: 2.51%
Yield to maturity: 1.59%
MHYF – Mutual High Yield Fund
Gross running yield: 7.33%
Yield to maturity: 5.51%