Markets Overview
- ASX SPI 200 futures up 0.4% to 7,358.00
- Dow Average up 0.3% to 33,684.79
- Aussie up 0.2% to 0.6654 per US$
- U.S. 10-year yield little changed at 3.4243%
- Australia 3-year bond yield rose 5.8 bps to 2.88%
- Australia 10-year bond yield rose 3.9 bps to 3.22%
- Gold spot up 0.6% to $2,003.60
- Brent futures up 1.6% to $85.55/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$800 Million 3.25% 2029 Bonds
- 14:45: (AU) RBA’s Bullock-Panel
Asian stocks look set to open higher after US markets traded in a narrow range ahead of inflation data that could signal whether the Federal Reserve will further raise interest rates.
Futures for equity benchmarks in Australia and Japan rose, while contracts for Hong Kong were little changed. The S&P 500 closed almost flat on the day Tuesday, while the tech-heavy Nasdaq 100 fell for the fifth session in six.
The Aussie was steady in early trading, holding Tuesday’s gains versus a broadly weaker dollar, and the yen was little changed after falling for a fourth day versus the greenback.
US Treasuries were mixed Tuesday, with the policy-sensitive two-year yield higher above 4%. Swap contracts priced about three-in-four odds of another quarter-point Fed hike in May, down slightly from Monday. Traders predict rates will peak around 5%, with the Fed then cutting by at least 50 basis points before the end of 2023.
In a report Tuesday, the International Monetary Fund warned it was too soon to sound the all-clear from the turmoil that’s shaken the world financial system, saying the banking breakdowns will likely be a drag on global economic growth. US banks on Friday will kick off what’s forecast to be the worst earnings season since the depths of the pandemic crisis.
Cracks in 2023’s equity advance are emerging, as hedge funds and other speculators amass the deepest short position since November 2011 when the US sovereign credit rating was cut. Bank of America Corp. data showed investors were selling US stocks across the board for the past two weeks as investors position ahead of Wednesday’s closely watched inflation print.
Other News
Australian companies are helping rouse European bond markets after the Easter holiday with planned sales from Sydney Airport and Telstra Group Ltd.
The financing arm of Australia’s biggest airport last tapped the euro market five years ago and is holding calls and investor meetings next week with a sale of at least €500 million ($546 million) of ten-year bonds likely to follow, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.
Telstra Group — one of the country’s largest mobile providers — is also holding meetings in the UK and Europe next week with the goal of selling a euro bond of a similar size and maturity, according to another person.
Sydney Airports has a euro-denominated bond maturing in April 2024, while Telstra has one coming due in September 2023.
Australian borrowers are comparatively rare visitors to the euro debt market and account for just a fraction of the non-financial corporate bonds sold in euros.
Spokespeople for Sydney Airport and Telstra didn’t immediately respond to a request for comment from Bloomberg News by email outside of normal office hours.
As in 2018, Sydney Airport is also offering a ten-year maturity, but its coupon will likely be much higher than the 1.75% rate investors received back then. The European Central Bank’s main interest rate has climbed to 3.5% from zero over the period.
Sales were slow in Europe on Tuesday after Easter holidays, with just one other deal in the primary market — a covered bond from CCDJ. Respondents to the most recent Bloomberg survey have predicted a strong week of issuance.
Corporate bond markets outside the financial industry have held up in the face of banking sector turmoil over the last month, with sales this year at almost €110 billion — about 15% more than at the same point last year, data compiled by Bloomberg show. Only financial issuers selling mostly the safest types of debt such as covered bonds have been able to tap markets.
(Bloomberg)
