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Mutual Daily Mutterings


Quote of the day…


”If you try to fail, and succeed, which have you done?”…George Carlin





“Dovetail Out Of There…



“I said NO…!”




Overview…”no let up…”


  • Moves: risk off on balance… Stocks ↓, bond yields ↓, credit spreads ↑, volatility ↑ and oil ↑….


  • War risk continued without let up, weighing on investor sentiment, driving stocks across the US and Europe lower, the latter tumbling to a one-year low.  Safe haven assets, such as treasuries and gold climbed, while oil headed for its biggest weekly surge in almost two years.


  • The Russia vs Ukraine conflict is beginning to seep into money markets…causing some in the market to reminisce about the dark days of 2008, when money markets went into complete meltdown following the collapse of Lehman’s etc.  The FRA/OIS spread widened +7 bps to 32 bps last Friday, the widest since May 2020, after rising +9 bps Thursday.  In Europe, similarly-watched gauges between the euro short-term rate and Euribor hit June 2020 highs.  Locally, BBSW 3M has hit 0.12%, still very, very low historically, but has double in the past week or so (five-year average is 1.0%).


  • Some interesting research / data out of a couple of the US brokerage houses, indicating insto’s are selling stocks, while retail is buying…that always ends well.  Goldman Sachs reported that “over three days, hedge-fund clients unwound risk at the fastest rate in three months in cumulative dollar terms. At the same time, flows tracked by JPMorgan showed retail traders bought US$4.1bn in the week through Tuesday, with money sent to S&P 500-linked ETFs more than 2 standard deviations above the 12-month average.” (Bloomberg)


  • “Views on the market always diverge but are doing so now in a particularly violent way, with war, Federal Reserve hawkishness and uncertain economic prospects challenging conviction. UBS Group AG published a scenario analysis citing a machine-learning model that reckons the Russia/Ukraine conflict could send the S&P 500 anywhere from 3,800 to 4,800 — a 26% range — depending on how it resolves.” (Bloomberg)…as helpful as an ashtray on a hang-glider.


  • Data…”US nonfarm payrolls blew past consensus, rising by 678,000 last month after a revised 481,000 gain in January, while the unemployment rate fell to 3.8% from 4.0%. The data will underpin Fed notions that the labour market is solid enough to withstand tightening. Wage growth stagnated month on month but picked up +5.1% YoY.” (Bloomberg)



The Long Story….


  • War Impact…so far…the following charts depict market changes since the Russians invaded Ukraine on 24th Generally speaking, local markets have held up well.  We benefit from only a modest trading relationship with Russia and Ukraine, and many of the markets that have experienced significant price increases in, we benefit from, i.e. wheat, oil, commodities etc.  Credit has held firm, more because of technicals and lack of liquidity than anything else.


Fixed Income…

Source: Bloomberg, Mutual Limited


Source: Bloomberg, Mutual Limited


Source: Bloomberg, Mutual Limited


  • Offshore Stocks – weaker sentiment across the board saw all key indices retreat.  European markets were -3.5% – 5.0% lower on the day and -7.0% – 10.4% lower on the week.  YTD European markets are well into ‘correction’ territory, down 15.0% – 18.0%.   US markets closed -0.5% – 1.7% lower on Friday, with the S&P 500 (-0.8%) dropping four out of the past five days.  YTD US markets are down -7.5% – 15.0% with NASDAQ materially underperforming.  Over the week, within the S&P 500, Energy (+9.3%) performed best as oil prices rose +20.0% over the week, with scope to go further.  Utilities (+4.8%) and REITS (+1.7%) provided some upside support.  At the bottom of the table, we saw Financials (-4.9%), Tech (-3.0%) and Telcos (-2.7%).


  • Local Stocks – while the local economy has minimal exposure to Russia per se, softer risk sentiment globally has seeped into local markets.  The ASX 200 dropped -0.6% on Friday, but gained +1.6% on the week, underpinned by strong gains across Energy (+8.9%) and Materials (+8.1%).  Outside of these two sectors, some modest gains across Utilities (+0.9%), Tech (+0.6%) and Industrials (+0.1%).  Elsewhere, it was modest retreats, with REITS (-1.9%), Staples (-1.6%) and Financial (-1.5%) all worst in show.  Futures are pointing to modest gains, mostly underpinned by commodities upside.


Source: Bloomberg


  • Offshore credit – continued risk off tone saw offshore spreads drift wider with US IG spreads +5 – 7 bps wider across Corporates and Financials (+9 – 13 bps o0n the week), while European IG Corporates were +8 bps wider, and +13 bps wider on the week.  Similar moves in CDS, +3 – 5 bps higher, +7 – 11 bps on the week.  On primary…”the Russian invasion of Ukraine along with the diametrically opposed inflationary backdrop continue to roil financial markets. These factors – along with the expectation of continued near-term heavy supply –  are likely encouraging borrowers to accelerate their issuance plans, operating under the assumption that the funding landscape could deteriorate further.” (Bloomberg)


  • Local Credit – traders…”a very quiet close to the week for flow with headline volatility keeping many investors sidelined.  No material change to ongoing themes with liquidity extremely poor, flow light and spreads drifting wider.” CBA headed to the US$ market for funding and paid overs, which had many in local markets scratching their heads in bewilderment.   I stated that at guidance on Friday morning the 3Y senior line swapped back at +77 bps (vs +49 bps in A$ secondary). I wasn’t confident in my calculations given how wide guidance was to A$ paper…I wasn’t wrong though, calculated swapped back levels were in the ball park.  The 5-year deal swapped back around +108 bps (vs +72 bps in A$ before the deal).  From the traders…”flow was light with today best described as a session of price discovery for major bank senior following CBA’s US$ print overnight and the broader risk off theme. No buy cares noted and only modest selling with NAB undoubtedly trading the heaviest of the four.”    While the broad risk off environment persists, we find it hard to see any situation that would cause spreads to materially tighten.  A sustained cease fire would be a start, and obviously a complete cessation of hostilities, but that is looking unlikely.  If anything, it’ll get worse.


Major Bank Spread Change…day and week

Source: Bloomberg, Mutual Limited


  • Bonds & Rates – bonds (ACGB’s) whipsawed through the day on Friday, rallying strongly on headlines that one of Ukraine’s nuclear power plants was under attack by Russian forces, and on fire.  Just how dumb are Russian soldiers to be firing rockets at a nuclear reactor?  Did they not watch Chernobyl?  Probably not actually, can’t imagine it was required viewing.  Either way, not smart.  In the end, the fire-brigade was let in and fires were extinguished.  But, the Russians did seize control of the plant, unfortunately.  Nuclear officials from both countries were called to attend negotiations by the international atomic regulator in order to lower safety risks caused by the invasion.   The rally ceased, bolds sold off and closed marginally changed on the day.   Friday evening saw a strong rally in bonds across the board, with US treasuries -11 bps lower, and EU bonds -6 – 9 bps lower.  It is conceivable that ACGB 10-year yields could go sub-2.00% if the situation in Ukraine continues to deteriorate, with no suggestion or evidence that it won’t (deteriorate further).  Having said that, consensus forecasts have 10-year yields climbing to 2.33% by year end, with the first-rate hike still priced in around July-September.



Source: Bloomberg


  • Macro – some commentary around commodities…”commodities are on course for a historic weekly surge, led by wheat, as the Ukraine war shuts off over 25% of the world’s exports. Aluminium rose to a record, while copper closed in on its all-time high. WTI is headed for the biggest weekly surge in almost two years.” (Bloomberg).  Some analysis has opined that a potential ban on Russian energy exports may send oil prices above $200/bbl (Brent closed at US$118.11/bbl, +52% YTD.  Reports also indicating that inflows into US-listed commodity ETFs more than doubled to US$3.1bn last week, led by precious metals.


  • Week ahead…nicking some comments from CBA…”there is relatively little in the way of local economic data next week.  We receive updated reads on consumer and business sentiment.  These figures cover the period after the worst of the Omicron wave and importantly will give more information on households and businesses’ views around the lift in inflation.  Weekly payroll jobs and the labour accounts figures will also be released, providing more insight into the state of the labour market.  RBA Governor Lowe on Wednesday will deliver a speech at the AFR Business Summit.  While the title of the speech has yet to be released, we may see Governor Lowe give his read on the most recent wages data and provide some additional colour on the RBA Board’s deliberations at the March meeting.  The RBA Board notably broadened their focus to labour costs, shifting from their previous formal focus on just wages growth.










Click here to find the full PDF from our Chief Investment Officer’s daily market update.



Scott Rundell, Chief Investment Officer

T: +61 3 8681 1907



Mutual Limited Daily Update

Mutual Funds

MCTDF – Mutual Cash Fund
Gross running yield: 0.29%
MIF – Mutual Income Fund
Gross running yield: 1.45%
Yield to maturity: 1.15%
MCF – Mutual Credit Fund
Gross running yield: 2.73%
Yield to maturity: 2.00%
MHYF – Mutual High Yield Fund
Gross running yield: 5.33%
Yield to maturity: 4.72%