Market Commentary.

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 [...]

Fixed Income Research Investment Strategy At the Breakdown: Fixed Income State of Play We have deep dived into fixed income markets, searching for value before the ruck forms. Despite an awfully weak inflation print, we have little faith in the long end, believing more is needed to understand if pricing pressure is indeed transitory. Ultimately, we believe the RBA will [...]

Fixed Income Research Investment Strategy Ark of the Covenant   Jock! Start the Engine! The longer the rout in global bond markets continues, the more difficult it will become for central banks to control. We continue to believe the US and domestic economy will firmly rebound and that the tide has turned for duration. The current predicament for central banks [...]

Fixed Income Research We’ve Been LIT Up But Will We Return to NAV?   That is a hard question to answer, but there is still a lot of meat on the bone here – both in terms of capital upside but also cash yield. Overall, debt focused Listed Investment Trusts (LITs) have performed well from March lows. Cash distributions have [...]