Greece again faces default and potential Euro exit, Chinese stock markets are calmed by government intervention and strong flows are seen in new-to-retail Plenary 2021 and NEXTDC 2019 as well as perennial favourites Sydney Airport 2020 and 2030 inflation linked bonds
Greece is the main focus of financial markets this week, with a potential default and exit from the Euro looming. A payment to the IMF due 30 June is looking increasingly unlikely and Prime Minister Alexis Tsipras has announced a local referendum next weekend to vote on austerity measures to unlock further funding. That is clearly too late and IMF Managing Director Christine Lagarde has ruled out additional financial assistance if Greece misses the 30 June payment. Capital controls were introduced in Greece yesterday to prevent outflows and they are expected to remain in place all of this week.
In China, stocks dropped over 7% on Friday affected by year-end liquidity conditions and uncertainty over monetary policy, while being exacerbated by the high degree of margin lending in that market. The central bank responded on Saturday by cutting lending rates and trimming bank capital reserve requirements.
Longer term rates rose steadily last week, but fell dramatically over the weekend as the Greece debt impasse looms. Overall yields are now slightly higher compared to last Monday. Our five and 10 year Australian Government bonds are up 10 and six basis points to 2.24% and 2.95% respectively. Credit margins fell over the course of last week, but spiked sharply higher over the weekend, and are currently around 99 basis points (0.99%, as measured by the 5-year ITraxx Australia credit index).
Scheduled for release this week on the domestic economic calendar are a few minor figures, including Private Sector Credit, Building Approvals, Trade Balance, and Retail Sales. The US has a shortened week, as Friday is a scheduled holiday for Independence Day, and employment figures will be released on Thursday, with expectations for 230,000 jobs added.
We have continued to see demand in the Plenary 2021 and Next DC 2019 fixed rate bonds, following their recent availability to retail clients. Investors also continue to form views on the future direction of markets and as a result we have seen active two way trade across both Sydney Airport 2020 and 2030 inflation linked bonds.
Given our recent new bond issues for SCT Logisitcs and W.A. Stockwell, we have excellent access across existing FIIG originated bonds at compelling levels. For more information please contact your dealer.
Rates accurate as at 29 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.