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Mutual Daily Mutterings

Quote of the day…


“Ironic, isn’t it, Smithers? This anonymous clan of slack-jawed troglodytes has cost me the election. And yet, if I were to have them killed, I would be the one to go to jail. That’s democracy for you”…Mr Burns (The Simpsons)











Chart du jour… a second cartoon, because its Friday…





OverviewPlenty to be worried about…”

  • Markets meandered around recent trading ranges last night as investors digested FOMC meeting minutes and a range of second tier macro data prints.
  • The highlight of the minutes was talk of a 2021 taper, slightly ahead of market expectations for an early 2022 taper. The market has taken this as a tightening signal, helping send Treasury yields, emerging-market and US stock indexes mostly lower and the US dollar up, despite an above-expectations jobless claim print.  Commodities remain under selling pressure on growth concerns.  Oil prices fell for a sixth straight session, pressured by concerns about weaker global travel.  Commodity price pressure has seen the AUD drop to 0.71, down almost 9.0% over the past couple of months.
  • To taper or not to taper remains a key conundrum for the Fed, and other central banks.  Now, the last time we had a tapering, or even the mention of one, in a historically context, we had a meaningful market hissy.  Stocks fell, yields rose, credit widened – that was the 2013 ‘taper tantrum.’  Why not one this time around?  We should expect the Fed’s policy normalization to occur without undue downward pressure on Treasuries (higher yields), and other related market consequences, because the market is more familiar with QE and the Fed has set up a standing repo facility, which should allay liquidity concerns (which didn’t exist last time).
  • Talking heads…on the downside threat to equities…”commodity prices, and oil in particular, are beginning to turn lower as have the latest inflation data while equities more or less power to new highs…while the drop in inflation may just be a temporary blip, the slide in crude since the beginning of June is not. If the commodity slump due to economic growth fears are real, a drop in equities should follow as happened in the beginning of 2020.
  • Bigger picture wise, whether markets can withstand the withdrawal of stimulus, as modest as it will be initially, in the face of the Delta spread remains a lingering concern.  Slowing China growth is also weighing on sentiment.


  • Offshore Stocks – a bit of a nothing session in US markets, while European stocks soiled the bed with the Euro STOXX tumbling -1.5%.  In US markets, across the trading day the S&P 500 oscillated between gains and losses, plus or minus 0.4%, before closing marginally up in the end (+0.1%).  The DOW closed a smidge lower (-0.2%), while the NASDAQ, a tad higher (+0.1%).  Within the S&P 500 just over half of stocks gained (+53%) and the split between winners and losers across the sectors was pretty even.  Energy again was beaten around the head, down -2.7% on the day and down -8.0% MTD after oil has fallen almost -15.0% since it’s July peak.  Materials (-0.9%) and Industrials (-0.8%) also had a tough day on the tools.  Keeping things afloat at the top were Tech (+1.0%), REITS (+0.9%) and Staples (+0.8%).
  • Local stocks – the ASX 200 maintained recent the gloom, falling every day this week, down -0.5% yesterday and now -2.2% lower since last Friday. The index started the day almost -1.0% lower and then spent the rest of the day clawing back some lost ground, but in the end it wasn’t enough.  It doesn’t help when the second largest sector in the index was taken behind the woodshed for an old-fashioned roughing up.  Materials fell -3.7% as iron ore prices continue to fall.  The sector is down over -10.0% MTD now.  As for why, this from CBA’s commodities guru, and former colleague, Vivek Dhar,… “iron ore prices dropped again overnight on demand concerns linked to China’s steel output restrictions in H2 2021. Prices have now declined 31% from July 15 to August 18, signalling just how quickly fortunes have turned for the steel making ingredient… steel mills in China are tolerating lower grade ores with higher impurities as their objective is now cost minimisation over maximising productivity”.  Elsewhere, Energy (-2.7%) also had a tough day on the tools, followed by Utilities (-1.7%).  Putting up a good fight at the top pof te performance tables we had Healthcare (+2.0%), Discretionary (+1.5%) and Tech (+0.7%).  Iron ore fell again last night, now down -33.0% since July 16, and oil fell another -2.0% overnight, both creating headwinds for the ASX 200 this morning…nevertheless, futures are up almost +0.5% this morning…go figure.



(Source: Bloomberg)



  • Offshore Credit – quiet here, nothing really worth commenting on.
  • Local Credit – leaning heavily on traders comments this morning, my three sons are close to being buried up to their necks in the garden this morning, absolute pains in the @#$!.  “A risk off tone continues to permeate broader markets however local credit holds it ground as evidenced by the bid tone seen in corporate paper yesterday. No deterioration to liquidity conditions although broader sentiment will continue to be watched closely, particularly as we edge closer to FYE for many dealers.”  Major bank senior drifted a touch, with the new NAB 5Y half a basis point wider at +39.5 bps (printed at +41 bps) and the Jan-25’s also half a basis point wider at +25.0 bps.  Some selling pressure in tier 2 as street inventory is a touch elevated.  The NAB Nov-26 and CBA Aug-26 both edged +2 bps to +131 bps and +130 bps respectively, while the remainder of the 2026 calls were +1 bps wider at +125 – 126 bps.
  • Bonds & Rates – a solid rally in local bonds yesterday as Delta infection rates linger, and continue to grow.  I’d suggest the way NSW is going, they’ll hit a thousand cases before long, and eventually Victoria will wear it as it leaks over the border.  Fun times.  We’ll be locked down for a while yet, even if we hit 80% vaccination rates, I can see Chairman Dan finding another reason to keep us locked up.  Leads from offshore were neutral.



(Source: Bloomberg)



  • Offshore Macro – Goldman (via Zero Hedge) downgraded its Q3 and Q4 GDP growth estimate by 1 ppt to 8.5% and 5.0% respectively “as it is becoming apparent that the service sector recovery in the US is unlikely to be as robust” as it had expected. It expects trend growth to have slowed to around 1.5% – 2.0% in H2’22, a far “sharper deceleration than consensus expects”. It had already cut its Q3 growth estimate in late July from 9.5% to 8.5%. The previous day Bank of America said Q3 data was tracking just 4.5% growth. It is worth remembering that last week Nomura lowered its estimate for Chinese Q3 and Q4 GDP growth to 5.1% and 4.4% respectively, down from 6.4% and 5.3%, and JP Morgan cut its Q3 growth estimate for China to 6.7% from 7.4%.
  • Local Macro – well, I didn’t see that coming…better than expect labour data…summary lifted from Merril’s…” AUSTRALIAN EMPLOYMENT ROSE 2,200 IN JULY; EST -43,100 Better than expected but it will get worse in August. Real surprise in the unemployment rate *AUSTRALIA JULY JOBLESS RATE AT 4.6% (down from 4.9%) due to lower participation. This gives the RBA a better starting point to assess the impact of the lock downs. But there was evidence of the lock downs in the data. ABS: “The labour market changes in New South Wales between June and July had a large influence on the national figures. There were big falls in New South Wales in both employment (-36,000) and unemployment (-27,000), with the labour force reducing by around 64,000 people. In addition, hours worked in New South Wales fell by 7.0 per cent.

Have a good weekend, as best you can….




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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%