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Mutual Daily Mutterings

Quote of the day…


“That was a great summer, the summer of ’71 – I can’t remember it, but I’ll never forget it”…Lemmy Kilmister (Motorhead)





Chart du jour…unemployment vs yields

Source:Bloomberg, Mutual Limited



“Don’t Shoot The Messenger…




  • A reasonable risk-off move across US stocks last night, which has been on the cards for a while now given frothy valuations and developing headwinds (geopolitical, Delta, tapering, peak growth etc).  The catalyst for moves last night was the release of the FOMC minutes, which provided a mixed bag of messages and differing opinions regarding the “to taper or not to taper” decision, and of course, when to taper.  Some favour in coming months, some favour next year.  Either way, no collective agreement has yet been reached.  The committee signalled the economy lacked the “substantial further progress” needed to meet its long-term employment and inflation goals.
  • Bond yields were up a touch over much of the trading session, by as much as +3 – 4 bps leading into the FOMC minutes, but then the mixed signals per above triggered a rally and yields closed relatively unchanged.  Volatility measures spiked again, with the VIX now +620 bps higher over the week at 21.6%, as investors hedge risk. Oil took it in the neck again, dropping another -2.4% (-5.7% on the week) after a surprise lift in US gasoline inventories.  Credit did little, very modest daily changes across cash and synthetics.
  • Looking at the Fed’s asset purchases since the pandemic, plus their three largest peer central banks in the world, total assets have grown by more than US$10 trillion since the beginning of the pandemic.  To put that into some context, that’s around US$1,300 per capita, globally!  Unfortunately for most, that US$10 trillion of stimulus has essentially gone into financial assets (which we have observed for a while now).  Admittedly this is a bit of a simplification, but for the lay-person, not an unreasonable one.  The scale of the increase in central bank assets over the year or so provides a sense that while we may get the odd retracement in risk assets, we’re not going to get a full-blown correction.  This is on the premise that central banks won’t begin to sell down their balance sheets anytime soon.  While tapering is a given over the near-to-medium term, the sheer volume of monetary accommodation within the system will continue to grow, probably for at least another 6 – 12 months, just at a slower pace.



  • Offshore Stocks – US stocks pared initial losses, initially, after a series of computer-generated sales were triggered after the FOMC minutes signalled a decision on tapering could happen in 2021. After a brief 30-minute window of recovery, the downward trajectory re-engaged and stocks slid further unto the red, closing at their intra-day lows.  Robot-tied sales were not completely unexpected, apparently, as computer-generated sales have been pretty common around mid-month, which has proven to be the case over the past four-months now. Plus, this week being an option expiration week can tend to weigh on shares.  On the day, some 90% of the S&P 500 stocks retreated, and only one sector, Discretionary (+0.2%) dodged the bloodshed.  Bathing in the crimson was Energy (-2.4%), not surprising if you looked at oil prices first.  Deputy Commander-in-Chief of carnage was Healthcare (-1.5%) followed by his / her (their) subordinate, Tech (-1.4%).  Over the last 12 months, any paring of gains in stocks, a la what we have witnessed over recent days, has been matched by dip-buying.  Let’s see if there’s any spirit left in that cohort…
  • Local stocks – a modest and shallow based sell-off yesterday in the ASX 200.  An aggressive drop at the open followed by an equally aggressive rally into positive territory, and then a very gradual decline into the red by the close.  Despite the closing position in the red, just under two-thirds of stocks advanced, and seven out of eleven sectors gained ground.  Unfortunately, the second largest sector, Materials (-3.0%), was slapped around the chops by a particularly large, slimy and somewhat rancid fish.  A distant second worst was Energy (-0.4%), and then Health (-0.4%) was the third worst.  At the top of the tables we saw REITS (+1.8%) reacting well to reporting season, followed by Utilities (+1.6%) and Telcos (+1.4%).  Futures are pointing to a meaningful sell-off this morning, -0.7%, which will take us to within 0.4% of the ASX 200 50 DMA, the first and historically (recent times) most significant resistance point.


(Source: Bloomberg)


  • Offshore Credit – a moderately busy session in US IG issuance, with six borrowers printing US$3.5bn, taking week to date issuance to US$8.4bn, in what was expected to be a subdued week of US IG issuance.  EU IG also subdued, just €7.4bn priced to date this week.  Very modest moves in secondary spreads across the board, all less than a basis point in either direction. CDS again saw modest moves, less than a basis point in either direction across the key indices. CDX (US) is at 51 bps, the MAIN (EU) is at 46 bps and the Aussie iTraxx at 61 bps.
  • Local Credit – traders…”a frustratingly quiet day following yesterday’s reopening of the A$ Senior market. Just one seller active in yesterday’s NAB transaction and with that particular domestic real money having sold their allocation we should perhaps brace for a period of forthcoming inactivity given the high allocation to bank balance sheets.  We close the new NAB 5yr -0.5 bp tighter mid, with a suspicion that a modest amount (sub $50m) of bonds are sat on secondary books. Otherwise, we closed the curve unchanged. We have a neutral view on spreads with the expectation that we remain in this range in the absence of any imminent maturities (next $1.75bn NAB Oct-21).  FXD paper remains better bid on scarcity value, investors will recall that yesterday’s FXD tranche on the NAB deal was also scratched”….yeah, what he said.
  • Bonds & Rates – meh, nothing really done locally, tumbleweeds, although I would note that 10Y yields are at their lowest since February this year, and some -78 bps below their end of February highs. No leads of note from offshore this morning.   Optically, last night also gave us nothing directionally – from open to close, minimal change in yields.  Intra-day however, signalled a desire by the market for yields to push higher, which is what consensus expectations are looking for, however the wishy-washy FOMC minutes took the jam out of that trend and markets closed largely unchanged, at the bottom of recent trading ranges.


(Source: Bloomberg)


  • Offshore Macro – some US housing data out, with Housing Starts printing a reasonably significant miss vs expectations, -7.0% MoM vs -2.6% MoM, while Housing Permits printed a modest beat, +2.6% MoM vs +1.0% MoM.  Tonight, jobless claims are out with consensus expecting initial jobless claims at 364K vs 375K last week, and continuing claims of 2800K vs 2860K last week.
  • Local Macro – wages price index out yesterday, with data underwhelming and missing consensus to the downside.  labour data out today.  Wages growth slowed, rising +0.4% QoQ vs +0.6% QoQ consensus expectations (and +0.6% last), while annual growth ticked up to +1.7% YoY vs +1.9% YoY consensus (and +1.5% YoY last).  For the reflation crew to get their wishes, wages growth is necessary to really give inflation a sustained boost.  The RBA is looking for +3.0% YoY as one of its targets, and we haven’t been at that level for eight years now.  Today, we have labour data, which is expected to show a meaningful deviation from recent positive trends.  With vast sways of the country being house bound, around 16 million of us, it’s hard to imagine jobs data doing anything but going backwards.  A total drop of -43K jobs is expected (consensus) vs +29K last month, while the unemployment is expected to tick back up to 5.0% from 4.9%, although the survey range is pretty wide, from lows of 4.5% (yeah, that ain’t happening) to 5.3% (maybe not probably, but possible).  The participation rate is expected to from 66.2% to 66.0%.


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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%