Monday 22 June 2015 by Lincoln Tragardh Week in review

From the Trading Desk

RBA releases its official minutes with a mild easing bias present, as expected the FOMC left rates unchanged in the US, Greek Prime Minister discloses new debt proposals to Eurozone leaders and yields were lower last week as a result of the news

Economic wrap

Last Tuesday, the RBA released the minutes from it’s June meeting. A mild easing bias was present, with the board stating that the cash rate was “appropriate” adding that “the stance of monetary policy should be accommodative”. This less dovish stance, is in line with the RBA Governor Glenn Stevens’ address to the Economic Society of Australia  on 10 June, where he stated that an “an official rate cut remains on the table”. Essentially it appears that any future rate cut will be contingent to further soft domestic economic data.

In the US, the Federal Open Market Committee (FOMC) left rates unchanged as markets expected, with 15 of the 17 FOMC participants stating their expectation for a rate change occurring in the latter half of this year.

With uncertainty surrounding the anticipated date of the US interest rate hike, FOMC chair Janet Yellen has stated that, “too much emphasis is placed on the timing of the first increase in the federal funds rate” and that market participants should direct their focus to “the entire expected trajectory of policy”. That said, most of the FOMC participants have revised their expectations to accommodate for slower interest rate increases in 2015. No participants anticipate interest rates to rise beyond 1% this year, down from four in March.

The Greek government has stated that Prime Minister, Alexis Tsiparis has presented Eurozone leaders with a “proposal for a mutually beneficial agreement that will give a definitive solution and not postpone addressing the problem”. According to an unnamed EU diplomat however, Greek officials have not submitted any new proposals and are apparently still finalising revised proposals. With no deal on the table but renewed hopes of coming to an agreement, an emergeny EU Leaders’ summit scheduled for tonight may be the catalyst for a last minute resolution.

Last week yields fell as a consequence of the dovish FOMC statement and uncertainty in the Eurozone. Australian Government bond yields fell by 12 and 10 basis points in the five and 10 year, to 2.16% and 2.90% respectively. In currencies, we saw the AUD appreciate against the USD, from 77.31 US cents to 77.81 US cents over the week, while climbing to a peak of 78.46 US cents following the release of the FOMC statement.


FIIG-originated two bond issues last week, for SCT Logistics and W.A. Stockwell. As is often the case around these new issues, we come into very good supply of existing bond issues as investors look for switches into the new deal. Please contact your dealer to capitalise on some of the bonds available.

Last week also saw two existing wholesale bonds become available to retail investors, with a third going retail this morning. We currently have good supply in these names for retail investors looking to diversify their holdings. Indicative offer yields to maturity below:

Plenary-7.50%-16Jun21                          5.94%

Qantas-7.50%-11Jun21                          5.48%

NEXTDC-8%-16Jun19                             7.42%

Rates accurate as at 22 June 2015 and are subject to change. All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities. For more information, please call your FIIG representative or our general line 1800 01 01 81.