Charlie Callan.

Many can recall the famous words of Paul Keating (PJK) in 1990 and cold comfort were they to households at the time. The RBA yesterday provided a parallel of icy resolve, this time to financial markets – with the implication being the same: crush inflation by inducing a recession. Rates – PJK: “Because mate, I wanna do you slowly” 1 [...]

The docile bond market of the past 20+ years is gone. Whilst many professional managers, allocators and advisors have been burned this past year, we expected underperformance but are now in the process of capitalising on higher yields. Whilst risks to rates and credit spreads remain, the possibility of moving up the capital structure (i.e. lower risk) to get a near equivalent income return (i.e. [...]

Many in markets are aware the US Treasury yield curve is inverting. This means yields at the short-end are higher than the long-end. Historically this has been bad for banks (they borrow short and lend long) and economic sentiment more generally. Further discussion is tacked onto the inversion, with regard to correlation and causation. In other words, just because there [...]

In 2022 we expect volatility to increase as a function of central bank liquidity draining from the system. In parallel, we expect inflation to remain persistent, as we have argued since May 2020. This makes asset allocation difficult as the prospects for real return in many sub-asset classes are slim. We noted the possibility of a mini-cycle in July 2021 [...]

Click here for a print friendly version. Walk the Talk BondAdviser’s desk, occasionally in WFH format, was active across a tumultuous 2021, providing over 360 recommendations, across 145 unique securities and 55 different issuers. More importantly, the vast majority (62%, [n=84]) of our conviction recommendations (defined as Buy, Sell, or Subscribe) added alpha against that of the respective security benchmark. [...]

Despite market sentiment, we believe there are growing risks to credit spreads of financials. This is technical in nature rather than fundamental. After successfully trading beta on subordinated financial bonds and hybrids, the repricing of senior spreads following the roll-off of the Term Funding Facility means we now look to underweight the largest component of the AusBond Credit Index. Non-financial [...]

Fixed Income Research Investment Strategy Bird of Prey Nowhere to be Seen With spreads largely at all-time lows and sourcing real yield proving problematic, asset allocation is challenging for those with constrained mandates. Flexibility in this environment is key; we are still finding ample value in the market, but much of this is capital, not carry based. Although the RBA [...]