Tuesday 22 January 2019 by Facilitation Trade opportunities

From the trading desk

Softest Chinese growth in a decade implies the trade war is starting to bite, IMF already downgraded growth forecasts and US markets closed on Monday. Clients continue to add investment grade bonds, with those holding the Bendigo and Adelaide 2019 call, exiting early and reinvesting

AUD & USD

  • Wholesale investors continue to add investment grade bonds to portfolios where they are underweight.The AMP 2023 call FRN has remained popular, and in good supply, offered at an indicative margin of BBSW+ 2.34%pa.
  • In USD, wholesale demand still remains for familiar names such as FMG and IAMGOLD.FMG has two maturities - 2022 and 2024 while IAMGOLD a 2025 maturity.They are offered at indicative yields to maturities (YTM) of 4.78%pa, 5.59%pa and 7.01%pa respectively.
  • Where portfolios are over weight fixed rate bonds, wholesale investors have been adding the Pioneer 2022 FRN.Often hard to source, the note is currently available at an indicative margin of BBSW+4.29%pa.
  • With Bendigo & Adelaide Bank’s 2019 call FRN being redeemed at the end of January, investors are selling now and reinvesting. Retail investors are purchasing Adani Abbot 2020 and wholesale clients in Bendigo & Adelaide Bank’s 2023 call FRN.Indicatively they are offered at 4.95%pa YTM and BBSW+1.92%pa, respectively.

 

Economic wrap

  • Markets were quieter earlier this week with the US closed for Martin Luther King Jr Day, and light data flow.
  • Talks continue between Democrats and Republicans to resolve the US partial government shut down, but to no avail, as it creeps into its fifth week.It has been another uncertainty rattling markets, and is expected to impact GDP for the quarter.
  • Chinese growth concerns continue after weak 4Q18 GDP data was released, confirming a slowdown in the world’s second biggest economy.Year-on-year growth came in at 6.4%, the softest since 2009.
  • IMF cut its global growth forecast for this year to 3.5%, down from 3.7% originally expected in October.IMF predicts fresh trade tensions will cause further weakness.
  • In Australia, jobs data due on Thursday is expected to remain strong with 18,000 jobs added for December.The unemployment rate is expected to stay unchanged at 5.10%.

 Note: Yields quoted above are accurate as at 22 January 2019 but subject to change

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