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Mutual Daily Mutterings

Quote of the day…


Gosh, it’s not like the internet to go crazy about something small and stupid” – Peter Griffins





Chart du jour…US PCE vs ISM Prices Paid

Source: Bloomberg, Mutual Limited





Overviewinflation week”

  • What a week!  It had something for everyone, laughter, tears, triumph and tragedy. Ten-year Treasuries hit lows of 1.12% (intra-day) and the S&P 500 fell as much as -2.2%, the worst daily sell-off since February.  In the end, both yields and stocks recovered, with the S&P 500 once again posting new all-time highs. COVID-related fears faded into the background despite rising cases and lockdowns, quickly turning into earnings-related optimism, which had market bulls all hot and bothered, and helping reverse the initial risk-off move earlier in the week.  Throughout this, offshore credit spreads largely held their ground – some modest widening in US Financials, but outside of that, spreads were resilient week on week.
  • Click bait…”even as the stimulus check giveaway fades and the stay-at-home era peaks, the Reddit-fuelled, Robinhood-powered retail crowd remains a force to be reckoned with — their dip-buying set the stage for the S&P 500 to hit a record Friday”.
  • Talking heads…”unlike some institutional investors who might find themselves starved for new funds, most retail investors enjoy a stream of income (payroll, dividends, rentals, etc)…hence, we wouldn’t be surprised to see strong retail purchases going forward but their appetite to buy anything riskier than indexed funds and blue chips seem limited for now.
  • US reporting seasons…”companies warning of cost pressures is a common theme emerging from earnings reports, adding another notch to the persistent inflation camp — and, building on evidence that inflation expectations risk becoming unanchored, prompting a steepening of the US breakeven curve”. Consensus inflation forecasts are suggesting the transition camp, which is headed up by the Fed, remain dominant.
  • For the week ahead, we have the FOMC meeting as well as earnings from big tech.  Companies reporting this week include Tesla, Apple, Alphabet, Facebook, and Amazon.  A busy week for macro data, with the main focus on US PCE Deflator (Fed’s inflation poster child).  The US treasury will also be busy in primary, with a 2-year, 5-year, and 7-year auctions. Locally we have CPI data, and credit growth figures.



  • Offshore Stocks – a solid and broad rally in global stocks on Friday night.  The Euro STOXX 600 rose +1.1%, which gave US markets a nice slip stream into their trading day.  The DOW lagged (+0.7%) the NASDAQ (+1.0%) and the S&P 500 (+1.0%).  On Friday we had 81% of the S&P 500 close higher, and only one sector, Energy (-0.4%) failed to advance.  Telcos (+2.7%), Utilities (+1.3%) and Staples (+1.2%) were all on the podium.  Stocks were +1.0% – 3.0% higher on the week, led by the NASDAQ.  Around 87% of the S&P 500 companies reporting results so far this season have beat consensus estimates.  As to the trend in the broader market from here, this sound-byte suggests recent gains are perilous…”the put/call ratio sits around all-time highs and, historically, rallies stall and even selloffs begin at those extremes.  Part of this may be down to hedging. If end users are buying puts, dealers must short stocks to hedge. This selling flow will pick up as prices fall and gamma rises. While a catalyst is still needed, the ground just got slippery”.
  • Local stocks – very modest gains on Friday in the ASX 200 (+0.1%), and a little firmer on the week (+0.6%).  On Friday we saw Healthcare (+1.3%), Tech (+1.0%), and Staples (+0.7%) take to the podium for the gold, silver and bronze.  Energy (-1.1%) took home the wooden spoon, with Financials (-0.5%) and Utilities (-0.2%) each in the naughty corner.  Futures are pointing to modest gains.


(Source: Bloomberg)


  • Offshore Credit – with no deals Monday, Thursday or Friday, primary market activity was subdued in US IG markets last week, just US$10.6bn printed, well below projections for around US$20bn.  The volume printed is the second slowest of the year.  Early projections suggest another subdued week with US$15bn – US$20bn as earnings seasons ramps up into full gear.  IG funds saw their first outflow of 2021 with US$1.2bn pulled by investors (Refinitiv Lipper Data), this is the first week of net outflows since November 2020.  Secondary spreads closed mixed on the week.  US IG closed between half a basis point and a full basis point tighter on the week.  In EU IG, financials were -3.5 bps tighter, outperforming corporates which were +1.0 bps wider.
  • Local Credit – from the mouths of traders…”a mildly active session to close out the week, decent participation from both domestic and offshore investors. Sentiment felt firmer with both corporates and SSA’s seeing some benefit, in financials the absence of major bank inventory saw spreads pull tighter.”  That’s right, there was movement at the station, for word had passed around…no new paper on the imminent horizon, so tighter we go.  The Jan-25’s ‘CRUNCHED’ tighter, -2 bps to +29 bps, while the three-years are a basis point tighter at +21 bps.  No movement in tier 2 on the day, but they made their move tighter earlier in the week, a couple of basis points tighter.  Across the AusBond Indices, fixed underperformed (+1.0 bps) floaters (-0.5 bps)
  • Bonds & Rates – according to a survey conducted by Bloomberg, the Fed will start tapering next year (2022) with an initial emphasis on the mortgage-backed market.  Economists also see rates rising faster through 2024 than previously thought. Just over half expect MBS tapering to be faster than Treasuries. They expect two 25 bp rate hikes by the end of 2023, matching the June dot plot, with three more in 2024.  On Friday US treasuries closed largely unchanged, while on the week it was a wide traded range, 1.19% – 1.29%, closing toward the top of this range.  ACGB’s did little on Friday in its trading session also, and with no meaningful lead from offshore markets, we’ll likely open directionless today.


(Source: Bloomberg)


  • Macro – a pretty busy week for data in both the local market and offshore.  Starting with the home market, Q2 CPI data is due out on Wednesday.  Consensus forecasts is for a +0.7% QoQ print vs +0.6% QoQ last quarter, and an annual figure of +3.7% YoY vs +1.1% YoY last quarter.  The annual figure is well outside the RBA’s 2.0% – 3.0% target range, but we all know why and we all know the RBA’s view that this is a transitory spike caused by the pandemic, which was at its peak, or worst, around June last year.  Consensus forecast for annual inflation at the end of Q3 is +2.4% YoY and then +2.0% YoY at the end of Q4.  Risk is to the high side.  Also, still in the inflation area, out this week in home markets, Q2 PPI data on Friday, which printed at +0.4% QoQ last quarter, or +0.2% YoY.  Lastly, private sector credit growth (RBA) for June is published on Friday, with consensus expecting a printed of +0.4% MoM, flat to May.  Offshore, focusing on the US, we have durable goods orders, and Corelogic house price growth, but the main focus – and potentially market moving – will be the June Core PCE Deflator print, which is due Friday night our time.  The Core PCE Deflator is the Fed’s preferred measure of inflation with the measure forecast to come in at +0.6% MoM (vs +0.5% for May) and +4.0% YoY (vs +3.9% YoY for May).  As with the AU CPI print, risk is to the high side given recent trends of overshooting.






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: 0.37%
MIF – Mutual Income Fund
Gross running yield: 1.46%
Yield to maturity: 0.82%
MCF – Mutual Credit Fund
Gross running yield: 2.58%
Yield to maturity: 1.69%
MHYF – Mutual High Yield Fund
Gross running yield: 5.65%
Yield to maturity: 3.99%