Wednesday 14 November 2018 by FIIG Research Sales commentary From the trading desk Global markets were down yesterday after Apple dropped USD50bn in value on slower growth concerns. Tech stocks were hit hardest. AMP issued a new Tier 2 while there was interest in Nufarm USD and Sydney Airport AUD & USD Last week, AMP raised $250m in regulatory compliant Tier 2 subordinated debt. This investment grade, floating rate security pays a quarterly coupon of 3mBBSW+2.75% and is a compelling investment option. Wholesale clients can exit their shorter dated Tier 2 holdings and switch into this new offering in the primary market. Interest in the USD Nufarm 2026 bond continued over the week for wholesale investors. The Australian company is a strong credit and given the bond is trading below par, there is a good case for potential capital appreciation. It is available at an indicative yield to maturity of 6.30%pa. Staying with USD, there was active trading in Barminco bonds following the credit positive developments, for wholesale investors. The bond is available at an indicative yield to maturity of 6.19%pa. Healthy supply of Sydney Airport 2030 ILBs was sourced, and remains a popular core holding in client’s portfolios. There remains a limited amount still available at an indicative yield to maturity of 4.98%, which includes a 2.5% inflation assumption. Economic wrap Apple shed USD50bn this week when key supplier, Lumentum Holdings, cut forecast revenue by USD70m. Two central bank decisions last week, two identical decisions (no change) and yet diverging views on what’s coming: on Friday morning, the US FOMC highlighted a slowdown in business investment (consistent with the expectation that US GDP peaked at the end of the 2Q18) while the RBA pointed to a marginally better outlook with lower unemployment and better GDP growth. Saying that, markets’ expectations of interest rate movements remained unchanged, with the US expecting a hike in December but rates remaining on hold in Australia until at least the 2H19. It was also a busy week on the regulatory front. ASIC provided its submission to the Royal Commission on insurance, with a view, among others, that commissions should be banned. But other suggestions do not appear to point to a fundamental restructure of the industry. Elsewhere, APRA published proposed changes to its bank capital adequacy framework which should, over time, lead to increased issuance of subordinated Tier 2 notes.