Expect More Debt Stress From Italy

Posted on | by Todd

One of the first lessons that we learned working on a dealing desk is that instability in sovereign bond markets can create sudden turmoil across a wide range of financial products.

The reason for this is because the aggregate amount of global bonds outstanding dwarfs the value of all the shares of stock in the world, combined.

Last Tuesday, global financial markets were spun into a frenzy as Italian sovereign bond yields exploded to the upside.

The catalyst for the move was President Mattarella’s rejection of the new government’s candidate for Finance minister, Paolo Savona.

Mr Savona is an outspoken critic of the EU and the Euro currency

As a result, Italian 2-yr bond yields rose from .68% to 2.42% in one day. That’s a rise of 250% in just 24 hours!!

Looking past the political aspect of this week’s events, Italy is well on its way to becoming the next financial basket-case in Europe.

Regardless of who governs Italy, the country will need to re-finance over 350 billion worth of debt maturities and close to 300 billion worth of non-performing loans over the next five years.

We consider the ongoing debt stress in Italy as a potential source of contagion for global equity markets, including the ASX 200 Index.

Italian Sovereign Yields

ALGO Update: Stay Long BBOZ

Posted on | by Todd

Our ALGO engine triggered a buy signal on BBOZ at $14.50 on May 3rd. This “higher low” formation is referenced to the low trade of $14.40 on January 10th.

BBOZ is the BetaShare ETF linked to the ASX 200 Stock Index. When the index falls, the price of BBOZ will rise, and vice versa.

We calculate that the price of BBOZ will be near $16.90 when the ASX 200 trades back to the April 3rd low of 5680.

Since reaching a high of 6135 on May 18th, internal momentum indicators have been trending lower for the ASX 200 Index.

For more information about BBOZ and opportunities to trade ETFs, in general, call our office on 1-300-614-002.

 BetaShare ETF BBOZ

 

 

ANZ Spikes Lower On Expected ACCC Charges

Posted on | by Todd

Shares of ANZ have dropped over 2% to $26.55 in early trade as the ACCC said it expects to lay charges on the bank over the handling of a $2.5 Billion share placement in August of  2015.

While the basis of the charges are not clear, we understand that ANZ Treasurer, Rick Moscati, and other individuals will be charged over the 80 million share placement.

Our ALGO engine triggered a sell signal on ANZ on May 11th at $28.10.  We see the next significant support level near $25.80.

We have been consistently cautious of the local banking sector all year, and still see scope for lower prices as loan growth continues slow to and profit margins continue to compress.

ANZ Bank