Resource sector bonds are displaying a level of volatility which some would probably call equity like. The heightened volatility and uncertainty in commodity prices is translating into large movements in resource related bonds. The chart below is a perfect example of this. It highlights four resource sector names (Fortescue, Newcrest, Glencore and BHP) and how the market has reassessed the fortunes of these companies in a short space of time. The turnaround in the trajectory of these bonds in the space of a few weeks is massive, particularly in the context of fixed income which is meant to be relatively stable asset class. Along with a mini-recovery in commodity prices, each of the companies has reported recent news which has either supported their credit profile or addressed key uncertainties surrounding the businesses. We believe each of the company’s credit profiles are sound and longer term we remain confident that these companies will survive the structural downturn in commodities. (VIEW LINK)