Tuesday 25 September 2018 by Leigh Winton Week in review

From the trading desk

What’s trading 

AUD & USD 

• After the Australian Office of Financial Management’s (AOFM) oversubscribed new $3.75bn inflation linked bonds maturing in 2050, there is renewed interest in the Sydney Airport 2030 inflation linked bonds.  Currently demand, from both wholesale and retail investors, outstrips supply.  Existing holders of the bond are able to sell at an indicative yield of 5.23%pa (including a 2.50% inflation assumption).
• In the USD space for wholesale investors only, there has been interest in Dean Foods post an update from our independent credit research provider.  They have an Outperform recommendation on Dean Foods’ bonds.  Supply is accessible in the 2023 bond and is available at an indicative yield to maturity of 7.38%pa.  
• Investors continued to sell out of the shorter dated 2020, 2021 and 2022 Qantas bonds that trade at a large premium to par.  Wholesale investors have been switching into the Liberty 2021 bond, while retail investors have been purchasing the DBCT 2021 floating rate note bonds.  The bonds are respectively offered at an indicative yield to maturity of 4.50%pa and 4.35%pa.  

Economic wrap
• Tariffs continue to make the headlines with the US announcing an additional USD200bn of goods facing the tax last week, initially at 10% then stepping up to 25% in 2019. Yet, markets rallied despite the potential dampening of global growth
• In the UK, the August CPI report showed a surprise larger than expected rise with annual headline and core inflation both up 0.2% to 2.7% and 2.1% respectively.
• Shinzo Abe was re-elected to an historic third and final term as leader of Japan’s LDP.

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