A dangerous consensus

Livewire Exclusive

At the height of the financial crisis, credit markets seized up and liquidity disappeared. In the aftermath of Lehman’s bankruptcy, this caused huge headaches for investors, institutions, and regulators. It may surprise you to learn then, that turnover in these markets is lower today than it was at the nadir... Show More

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Credit Snapshots from February 2018

Jonathan Rochford

With the increase in the American overnight rate and long term bond yields questions are starting to be asked about whether the federal government debt load is sustainable. As interest rates increase, so does the interest bill. Neither major political party seems to care, they have taken turns at making... Show More

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Can Australian homeowners handle higher rates?

Livewire Exclusive

The average variable home loan rate in Australia has fallen from 8.3% to 5.1% in the past ten years, enabling households to borrow more and drive house prices higher. Despite higher levels of household debt, Australians’ level of mortgage stress is quite low. But what if interest rates go up?... Show More

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Outlook 2018: Australian credit remains attractive

Nick Bishop

We expect 2018 to be a stable year for Australian fixed income, with the performance of the domestic economy constraining the RBA’s ability to increase interest rates in the near-term. This is predominantly the result of weak wage growth and inflation running below the RBA’s target. The former is due... Show More

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Livewire Summer School: November rain, and insurance claims

Livewire Exclusive

Guns N’ Roses released their first debut album titled “Appetite for Destruction” in July 1987. Three months later one of the most violent and unexpected equity market corrections in US history occurred. The Dow lost 22.6% of its value on Black Monday, and the causes behind the dramatic fall are... Show More

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High Returns, Low Volatility – What Could Possibly Go Wrong?

Jonathan Rochford

Economic news was strong in October, led by US Q3 GDP coming at an annualised rate of 3.0%. Quarterly earnings and sales for S&P 500 companies are beating estimates by more than usual. One standout was bellwether stock Caterpillar, which after four years of declining revenue has seen sales up... Show More

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Would You Lend to Tajikistan?

Jonathan Rochford

The issue of bonds by Tajikistan this month follows on from recent low quality bond issues from Argentina, Greece and Iraq. Emerging market debt investors piled into the offering allowing the nation to issue US$500 million of ten year bonds at 7.125%. Investors who bought in cited the yield on... Show More

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Emerging Market Debt: Dumb, Dumber and Dumbest

Jonathan Rochford

One of the classic signs that the credit cycle is nearing the end is that borrowers that shouldn’t be getting financed not only get funded, but get it at terms that seem crazy. I’ve recently written about the silly things happening in global high yield debt, Chinese debt and the... Show More

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Spectrum Insights - The capital adequacy fallacy

Damien Wood

The recent collapse of a Spanish bank, two Italian banks, and a missed payment on tier one notes from a German bank reinforced some core beliefs for investing in bank capital. These are:- Show More

May Market Commentary

Jonathan Rochford

Another month of small gains in equities and credit, whilst commodities continued to fall back. Equities were up in Japan (2.4%), China (1.5%) and the US (1.2%) with Europe pretty much flat (-0.1%). Australian equities (-3.4%) were the standout loser. High yield and investment grade credit in the US and... Show More

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How many RBA hikes can you handle?

Callum Thomas

With the consensus slowly but surely shifting to expect rate hikes from the RBA, it's worth thinking about the impact of RBA hiking cycles on asset markets. One asset class we recently looked at is Australian credit spreads - we took a look at a few different drivers, and the... Show More

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The Great Credit Illiquidity Myth

Christopher Joye

For years I have been told that secondary corporate bond, or "credit", markets are illiquid and difficult to trade in. The problem is that anyone who actively trades credit knows that this is a myth. Last month I put $500m of new money to work in credit in a matter... Show More

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March Commentary: Markets Take a Breather After “Yuge” Gains

Jonathan Rochford

The Trump rally took a breather in March with risk assets mixed. Equities were flat in the US and China, rose in Europe (5.5%) and Australia (2.7%) and fell in Japan (-1.1%). US investment grade and high yield credit gave up a small portion of the recent gains. Commodities mostly... Show More

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January Market Commentary: A Quiet Start to an Interesting Year

Jonathan Rochford

January was a quiet month for risk assets with President Trump’s first actions far more interesting than markets. The risk/return outlook in the medium term isn’t great for many asset classes, but there’s some signs of better economic conditions in the US which might help 2017 returns. There’s also sections... Show More

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What’s driving The Great Rotation?

Livewire Exclusive

In the second half of 2016, as markets began to realise that the bottom for bond yields had likely been hit, a seismic shift started to occur in equity markets. In recent years, quality and growth had been the focus of larger fund managers. “A weight of money came in... Show More

Spectrum Insights - The worst of both worlds

Damien Wood

Australia’s RBA has its foot on the accelerator while the global bond markets are tapping on the brakes. Just when Australia’s economy could do with some stimulus it faces some headwinds from abroad. Rising bond yields internationally are spilling over into our bond markets. This hurts fixed rate bond prices.... Show More

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October Review: Do You See What I See?

Jonathan Rochford

October was a mixed month for risk assets and a bad month for safe haven assets. The main equity indices fell in the US (-1.9%) and Australia (-2.2%), but rose in Japan (5.9%), China (2.6%) and Europe (1.8%). Commodities were also mixed with US oil (-3.2%) and gold (-2.9%) down,... Show More

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Banks profits – Goldilocks

Damien Wood

Some politicians are bleating Australian bank profits are too high. Some financial commentators are fretting saying they are heading too low. At Spectrum we see bank profits from a credit viewpoint as about just right. Often lost in the commentary is perspective. When benchmarking Australian bank profitability against government bond... Show More

Cool heads urged as disconnect grows in markets

Patrick Poke

MFS Chief Investment Strategist, James Swanson, has sounded a warning to yield chasers in his latest note. "Lately, we have witnessed a growing disconnect in the financial markets too. Asset class after asset class continues to rise in value despite stagnant global economic growth and flagging corporate profits... The "chase... Show More

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Interview with Peter Switzer on What's Cheap/Expensive

Christopher Joye

In this interview I discuss with Peter Switzer what asset-classes are cheap and expensive and what the bond market is telling us about the economy. I also shed some light on our contrarian investment style in which the cash deposit weight in our core portfolio has oscillated between circa 15%... Show More

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