Tuesday 20 November 2018 by Jessica Rusit Sales commentary From the trading desk Apple’s reduced production lands it on a new four month low, risk off tone in US and European credit markets, new DirectBond from AMP, Nurfarm interest continues and supply in Resimac RMBSAUD & USD AMP 2023 call Tier 2 security has been added to the DirectBond list and started trading in the secondary market last week. This investment grade bond for wholesale investors only, is currently available at an indicative margin of 3mBBSW+2.30%. Supply in Teachers Mutual Bank (TMB) 2022 call Tier 2 bond was uncovered over the week, allowing holders of the shorter dated sub debt bonds to switch. Investors exited IAL 2019 call, ANZ 2019 call and Adelaide Bank 2019 call bonds to purchase TMB 2022 call. There remains limited supply available for wholesale investors at an indicative margin of 3mBBSW+2.15%. In USD bonds, clients continue to add Nufarm 2026 to portfolios, selling down other USD holdings to fund. The bond offers an attractive yield to maturity for wholesale investors at 6.47%pa. Resimac 2018-2 RMBS launched in primary last week, which FIIG was able to secure a good allocation of C and D notes for clients. The securities will begin trading in the secondary market following settlement for wholesale clients. Economic wrapApple fell to fresh four month lows after the WSJ reported that the company has already reduced production orders for all three new iPhone models launched in September. APRA has proposed to strengthen the total loss absorbing capacity (TLAC) of domestic major banks by increasing their total capital ratios by four to five percentage points.APRA expects the banks to satisfy this requirement predominantly through the issuance of Tier 2 capital (estimated to be as much as AUD75bn, in addition to the refinancing of existing instruments). Tier 2 capital is the cheapest form of loss absorbing capital currently available to the major banks and we would expect an increase in Tier 2 supply as a result.There has been some marginal (10-12bps) widening of spreads of major bank paper as a result of this announcement. The risk sentiment is reflected in credit markets, with investment grade spreads widening out 3bps in both the US and Europe (high yield spreads have widened about 10bps). The slide in cryptocurrencies has continued, with Bitcoin falling below $5000 for the first time in 13 months.