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Mutual Daily Mutterings

Quote of the day…


“What’s the definition of a good tax accountant?  The accountant has a tax loophole named after them …” – random dad joke









Chart du jour… two cartoon Tuesday

Source: Bloomberg, Mutual Limited







  • Not a lot happening across risk markets ahead of tonight’s US CPI printed, little data and not much news.  European stocks edged higher – another record high, while US stocks eased off the throttle in the end after oscillating between gains and losses.  Volumes were light.  Bond yields continued to drift higher with US 10-year Treasuries rising above 1.30%, passing its 200-DMA.  Oil took it in the neck on growing demand concerns, linked to accelerating Delta cases in the US, with daily infections reaching prior winter highs.  There is a resonating concern that the Fed will soon take its candy jar away from the market, which can’t be too much of a surprise.
  • Talking heads…”most of the sectors within the S&P 500 continue to trade above their long-term averages and while there is some deterioration in the technical picture, stocks still look to see-saw higher through the last dog days of summer”. If street strategists are to be believed, these “last dog days of summer” could really drag out.  Recently published stock market outlooks for 2022 indicate strategists are pegging their 2022 year-end targets at 4,900 – 5,000 for the S&P 500.  This represents 10% – 13% upside from last night’s close.
  • Fed speak…Raphael Bostic, Atlanta Fed President, was out and about spruiking his views overnight.  He’s agitating for a start to tapering as soon as September, and with speed, especially if the economy continues to record strong jobs gains.  Fellow Fed member, Kaplan, endorsed these views in separate comments.  Bostic, favours “a balanced approach” to tapering, reducing both MBS and treasuries proportionally at the same rate.
  • Talking heads…”His [Bostic] comments are another trial balloon preparing us for an end-of-year start to tapering.  Investors in general would prefer a sooner and more drawn-out tapering, than a delayed one that would then require sharper action. The big concern is that a delayed tapering would put the Fed behind the curve – if they aren’t there already”.  That latter comment is a key risk, if proven to be the case, an aggressive Fed, by necessity or otherwise, could trigger elevated bouts of market volatility.


  • Offshore Stocks – a wobbly day for US markets, while European markets (STOXX 600) continued to grind higher.  The European index is up almost +6.0% over the past 30 days and its relative strength indicators are approaching overbought territory.  Within the S&P 500, 64% of stocks retreated, as did seven of the eleven main sectors.  With oil taking a hit, no surprises that Energy (-1.5%) led the way down the garden path, followed some distance behind by REITS (-0.4%) and Industrials (-0.4%).  Health (+0.4%), Staples (+0.3%) and Financials (+0.3%) put up a valiant rear-guard fight, with the latter aided by rising yields.  E-mini’s are down a touch in after market action for the DOW and S&P 500, while the NASDAQ is keeping its nose above water.  Some useless, but mildly interesting data…the S&P 500 closed last Friday at its 44th new high of the year. At the current pace, the index would set records 74 times in 2021.  That’s within striking distance of the highest-ever annual total: 77, from 1995…told you, useless.
  • Local stocks – the ASX 200 was up for most of the day, peaking at +0.4% in early trading, however as the day wore on sentiment faded and in the end the index dipped by a few points – unchanged to two decimal places.  Two sectors duked it out for supremacy, at either end of the performance spectrum.  In the green trunks we had Financials (+1.3%), which emerged as the heavy weight champion on the day.  Insurance players dominated, specifically, SUN (+7.8%), IAG (+4.6%) and QBE (+3.2%), the catalyst being better than expected full year results for SUN, and some investment banks trying to drum up business by speculating on takeovers.  Most banks gained +1.0% or more also.  In the red trunks, fighting valiantly for the bears, Materials (-1.1%) went down swinging, with Industrials (-0.8%) and Discretionary (-0.8%) also in their corner.  Futures are pointing to a modestly positive open.


(Source: Bloomberg)


  • Offshore Credit – August was expected to be front-loaded with syndicate desks clearing their deal pipelines ahead of a late-month lull, and Monday delivered as 15 companies printed US$16.9bn of new bonds.  A more muted, but still active start to the month for EU IG primary.
  • Local Credit – very little to comment on, no change in themes or market dynamics one iota!  Traders…”a muted open to the week for AU secondary credit with small sized buying of major bank fixed, corporate and SSA paper the only discernible theme.  Domestic accounts were subdued and offshore players quiet given public holidays in both Singapore and Japan.”  Spreads unchanged.
  • Bonds & Rates – very modest steepening in local bonds yesterday as the COVID situation is keeping bonds somewhat bid.  Very little data out locally this week that would likely move markets, so local bonds will be beholden to global themes.  Ahead of tonight’s US CPI print, treasuries drifted higher again, +2.5 bps in the 10’s to 1.32%, or +15 bps in the past week.  The US vs AU 10-year spread is out to +12 bps, levels not seen since earlier in the year, reflective of the local concern around COVID lockdowns, and growing expectation that the Fed will join the tapering club.  A miss to the high side on CPI tonight will likely see this spread widen.  Treasuries also declined under the weight of larger-than-expected corporate supply.


(Source: Bloomberg)


  • Offshore Macro – US CPI tonight, with consensus expecting an easing back from the abyss, relative to the prior month’s reading, so +0.5% MoM vs +0.9% MoM in June.  Consensus is expecting an annual number of +5.3% YoY vs +5.4% YoY in June.  I don’t have a strong reason to dispute consensus expectations, however would point out consensus missed the boat last month, and by a meaningful margin: +0.9% MoM actual vs +0.5% MoM consensus, and +5.4% YoY vs +4.9% YoY on the annual numbers.  Given all the anecdotal evidence, the risk is CPI will print top the high-side of consensus.






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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: 0.36%
MIF – Mutual Income Fund
Gross running yield: 1.45%
Yield to maturity: 0.75%
MCF – Mutual Credit Fund
Gross running yield: 2.57%
Yield to maturity: 1.63%
MHYF – Mutual High Yield Fund
Gross running yield: 5.71%
Yield to maturity: 4.05%