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Mutual Daily Mutterings

Quote of the day…


I have an idea so smart that my head would explode if I even began to know what I was talking about” – Peter Griffins






Chart du jour…US break evens

Source: Bloomberg, Mutual Limited



“Fear Of Making Choices (FOMC)…



Overviewtreading water ”

  • A bit of a nothing session across Northern Hemisphere markets with very little movement across any particular market.  European stocks closed off a touch, while US stocks oscillated between gains and losses, on some encouraging earnings results, closing marginally ahead. However, the narrative continues to focus on concerns around the pace of growth and inflation as well as the impact of the COVID delta variant on the economic recovery.  Bitcoin surged toward US$40,000 on speculation Amazon would begin accepting the cryptocurrency for payment.
  • Chinese markets were belted around the head with a gnarly two-by-four, down over 3.0% after regulators in China unveiled an overhaul of its education sector that bans firms that teach school subjects from making profits, raising capital or going public. A gauge of US-listed Chinese stocks has fallen -45% since hitting all-time highs in February.  Still on China, the communist regime lashed out at US policies in a tense start to high-level talks in Tianjin, declaring the relationship between the two countries “in a stalemate and faces serious difficulties.”  Takes two to tango.  Talking heads…”given the magnitude of the uncertainties, it is challenging for us to quantify the overall risks at this point, but it is clear that we are entering an uncharted territory with substantial moving parts.
  • Bond yields did little, a very modest bear steepener (+1.5 bps) in US treasuries, while the real yield on US 10-year debt hit a new record low ahead of this week’s FOMC, at which officials are expected to discuss the outlook for monetary stimulus measures.  Talking heads…”we’re heading into a very eventful week with big tech earnings and a Fed meeting….the market showed how resilient it was last week, with the impressive bounce-back from the sustained selling on Monday, but we expect more caution as all eyes (and ears) turn to the Fed.
  • COVID commentary…I came across this yesterday…whilst the number of vaccinations now equates to 49% of the world population based on Israeli data, there is a growing concern that protection against infection and mild disease may have already dropped to 0% for those injected 6 months ago.  This is likely because COVID vaccines don’t achieved “mucosal immunity” in contrast to natural infection, and serum antibody levels in the blood decrease within months.  That’s a cheery thought.



  • Offshore Stocks – a modest and narrow rally in US markets.  Just over half of the stocks in the S&P 500 gained, while more sectors gained than didn’t.  Leading the charge, Energy (+2.5%), followed by Materials (+0.9%) and Discretionary (+0.8%).  Only Healthcare (-0.6%) was showing any real battle scars, the other laggards where generally flat.  A point to note on US markets, especially this week with so many tech stocks releasing results, Bloomberg is reporting that hedge funds….”have been shorting futures on the NASDAQ 100 Index for 22 straight weeks. The only time this stretch was exceeded was in the heart of the financial crisis in 2008.” With this in mind,…”since the start of this year, though, with a little more certainty on both the political and vaccine front, the stock market has seen smaller and more frequent “mini-corrections.” This year has yielded 10 such instances with an average 3.1% drop in the benchmark index following a new record high (with drops of as much as 5-6%), in just six months. And each time, the VIX has pushed above its heavily-watched 20 handle. If this week follows that trend, we’re likely to see some sort of pullback by the end of this week or early next week — and it could be an ugly one.” E-mini’s are up a touch.
  • Local stocks – local stocks opened with a slightly optimistic shade of green, but then e-mini’s turned red, which took the jam out of the ASX 200’s donut…albeit very moderately so, in fact you have to go to the third decimal place to know it was in the red.  Let’s just call it amber, largely unchanged.  Having said that it was a relatively even ‘unchanged’ day, with 59% of stocks in the red, and only one sector up on the day, Materials (+1.0%), which did enough to offset the collective pain elsewhere.  Energy (-1.4%), REITS (-0.9%) and Tech (-0.6%) were the primary trouble makers.  Futures are up a touch.


(Source: Bloomberg)


  • Offshore Credit – as is generally the case ahead of FOMC meetings, modest issuance with just three deals and US$3.1bn printed in US IG.  What little there was attracted strong interest, with new issue concession of 5 bps, books were 3.4x over-subscribed and spread compression was -21.5bps. A few deals announced in EUR IG, but not a lot done.
  • Local Credit – zero to add today, traders reporting a slow start to the week, major bank spreads unchanged across both senior and sub.  Nothing really doing elsewhere either.
  • Bonds & Rates – some insights from NAB “interesting price action for the US treasury market overnight with real yields heading lower while BEI’s are higher. The US 10-year real yield is -3.4 bps below Friday’s closing level (intra-day reached a new record low of and at -1.13%) while the 10-year BEI is +5.2bps higher at 2.40%”.  Range bound in local bonds yesterday, borrowing some words from CBA yesterday…”Australian markets are tracking sideways today, despite a solid rally in Chinese government bonds. Keep an eye on this development as it is driven by a sharp drop in economic activity. The RBA was in the market for $A2bn of bonds under the bond purchase program, while the AOFM sold $A800m of the benchmark 10Y (Nov 31).


(Source: Bloomberg)


  • Macro – nothing to report locally, CPI out tomorrow.  The FOMC meeting is coming up shortly (Thursday).  Some words of wisdom on the FOMC from my former colleagues at CBA…”we expect the FOMC will leave the Fed Funds rate and its asset purchases unchanged.  However, we expect the FOMC to change its guidance on its monthly asset purchases because the labour market is improving.  Specifically, we expect the FOMC to drop “substantial” from “substantial further progress” – the threshold for continuing to purchase $US120bn/mth of assets.  Removing “substantial” will signal the FOMC believes it will soon be appropriate to taper asset purchases and that can support the USD.  But the risk is skewed to an unchanged statement if the FOMC is concerned about downside risks from the surge in the delta variant”



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%