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Mutual Daily Mutterings

Quote of the day…


“Facts are meaningless. You could use facts to prove anything that’s even remotely true!”” –  Homer Simpson






Two-cartoon Friday…our saviour…



“Burning The Candle…




Overviewone of those nothing sessions where it’s hard to find anything to comment upon …”.

  • Choppy, chop-chop…that’s the inner-child in me describing last night’s price action in US stocks.  With weak European leads, US markets opened on the back foot, but then turned the corner, closing factionally ahead.  Trading was volatile ahead of options expiration, which is forecast to be the second-biggest in recent history.  US jobs data surprised to the high-side for initial jobless claims, but to the downside for continuing claims.
  • Talking heads….”US equity markets remain in record-high territory as strong consumer demand continues to offset supply side constraints and inflation concerns. Monetary policy remains accommodative and despite the recent uptick in volatility, interest rates remain historically low. The technical setup remains bullish.”  While there are some street strategists calling for hell and brimstone in markets, more are still in the bullish camp, expecting markets to creep higher over the coming 3 – 6 months.  Beyond that and it becomes very murky as markets will need to contend with rate hikes (expected) and inflation risks.  JPM changed their tune on rate hikes last night, for the first one, moving their estimates to September 2022.
  • Fed news…some signs emerging that President Biden will tap incumbent Chair, Jerome Powell, to go around again.  The Biden administrations chief labour market economist was on the wires overnight echoing many of Powell’s views of the world, specifically “that inflation is transitory and linked to supply-chain woes.”  Said economist also favours keeping rates low despite high inflation to keep the economy hot to support the jobs recovery.  An announcement on the next Fed chair is expected next week, with the decision being a two-horse race, between Powell, a dove, and Lael Brainard – a slightly more dovish dove. According to some polls, Powell is odds-on favourite.
  • European rates outlook… markets are believing the ECB’s Christine Lagarde, pushing bets on the first ECB rate hike to 2023.  Markets now expect the ECB to hike rates by 10 bps in Feb-23, a sharp turnaround for those who were pricing as much as 20 bps of tightening for 2022 last week. Lagarde said on Monday that “conditions for an increase next year were very unlikely to be met.


  • Offshore Stocks – the Euro STOXX was unable to notch up its tenth day of gains, dropping -0.5%, possibly on rising COVID cases, which set the early tone for US markets.  Nevertheless, a less than convincing, and shallow rally followed with more stocks down than up, 68:32, but it was the ones that rose that mattered, i.e. a strong showing by Tech (+1.1%) drove most of the broader index’s gains, and a strong day in the Discretionary (+1.4%) space also.  At the bottom of the food chain we had Utilities (-0.6%), Materials (-0.5%) and Energy (-0.5%).  As part of the surge in tech stocks, “Apple is accelerating development of its electric car and is refocusing the project to create a fully autonomous vehicle, people familiar said. Under software executive Kevin Lynch, the company’s car team is moving away from creating a model with limited self-driving capabilities that focused on steering and acceleration. Shares rose as much as 2.9% on the news.
  • Local stocks – the ASX 200 started the session with a slight reddish tinge, but shortly turned green…just.  The index closed +0.1% ahead, on a generally uneventful day.  Uppers trumped downers, but there were also many stocks unchanged.  More sectors gained than not, with REITS (+1.2%) king of the hill, followed by Telcos (+1.1%) and Healthcare (+1.1%).  The role of village idiot went to Discretionary (-1.6%), with the under-study part going to Energy (-1.5%).  The biggest impact to the index on the day, however, went to Financials (-0.6%) as markets continue to digest CBA’s Q1 trading update.  Australia’s largest bank dropped another -1.6%, taking it’s two-day flogging to almost -10.0%, pretty rare air for CBA (outside of ex-div dates). Peer banks dropped -0.7% – 1.6% yesterday.  If you’re a believer of relative strength indicators, some ‘time-to-buy’ signals emerging with CBA hitting RSI’s of 29.5, below the ‘oversold’ trigger (30.0).  The stock price is back within a whisker of its 200-day moving average and still ~5% above average analyst 12-month price targets ($93.05 vs $97.46 last). Futures are signalling very modest gains.



(Source: Bloomberg)



  • Local Credit – a quiet day in secondary with primary the main business of the day, predominantly in the corporate spaceTraders are reporting they’re hearing issuance is expected to thin out in coming weeks, which will bring some attention back to secondary.  In the financials space, from the traders…”spreads largely unchanged, with flows skewed to better selling. The inventory that we did manage to sell can be easily replaced reinforcing our view that spreads are likely to remain in a holding pattern for the foreseeable future.”  In the senior space, only the Aug-26’s moved, +1 bps to +59 bps, while the rest of the curve closed unchanged.  In the tier 2 space, some ongoing selling pressure and an absence of buyers.  Traders are reporting that liquidity conditions are poor with the street uniformly positioned.  Flows were light, with street hesitancy to play until buyers show themselves.  The major bank tier 2 curve closed +1 bps wider in unison.  The 2026 calls are quoted around +136 – 140 bps, and the 2025’s at +127 – 131 bps.  The 2024’s are unchanged at +99 bps.  CBAAU issued a CHF250m 7yr senior unsecured and CHF190m 10yr covered bond overnight. The pricing was MS+28 bps and MS+8 bps respectively, and swaps back to $D at around BBSW+80s handle.
  • Bonds & Rates – a modest rally in local markets yesterday on muted news flow and no meaningful data to speak of.  Nothing today to move the dial either.  Offshore markets were mixed with a modest rally across European markets, around 3 – 4 bps across GILTS, OATS and BUNDS (10-year), while US treasuries closed largely unchanged around the middle of the curve, but slightly cheaper across the long-end of the curve after S&P 500 and Nasdaq 100 futures breached Wednesday’s highs.  Given lack of meaningful direction from offshore and no data of any significance, I’d suggest it’ll be a quiet day in the market.
  • Some commentary from CBA…” New York Fed President John Williams spoke about the uptick in US inflation expectations overnight.  Williams noted that longer run expectations had ‘moved up quite a bit’ following ‘broader based increases in inflation’.  He also said that he wouldn’t want to see inflation expectations lift significantly further.  There is a risk that broad and rising underlying inflation can prompt the FOMC to increase the pace of its tapering and therefore hike earlier than we currently expect (September 2022).  But we view a faster taper as a low risk at this stage”.



  • Offshore Macro – US initial jobless claims printed slightly above consensus (+268K vs +260K) but the broader downward trend in claims is still intact (continuing claims: 2080K vs 2120K).  The Philly Fed survey delivered a strong upside surprise, especially given the weakness in some of the Chinese activity indicators.  Some ANZ commentary….”the November Philadelphia Fed index surged to 39.0 vs 23.8. Prices paid leapt to 80 vs 70.3 and prices received jumped to 62.9 vs 51.1, showing intensifying inflation pressures. New orders rose to 47.4 vs 30.8, which will contribute further to inflationary pressures. Unfilled orders rose to 27.4 vs 12.7 as supply constraints continue to manifest in delays. Employment eased slightly to 27.2 vs 30.7, but that may reflect difficulty in finding skilled labour. The average workweek rose to 30.6 vs 27.8.
  • Local Macro – nothing of significance yesterday or today.



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: 1.38%
Yield to maturity: 0.89%
MCF – Mutual Credit Fund
Gross running yield: 2.69%
Yield to maturity: 1.82%
MHYF – Mutual High Yield Fund
Gross running yield: 4.91%
Yield to maturity: 3.98%