Daily Commentary BY THE CURVE TEAM –

Markets Quiet Ahead of Data as Short End Rates Rise

13th of March, 2018

It has been a quiet start to the week with markets relatively contained compared to Friday’s price action. The data flow kicks up a gear today both locally and offshore which should give the market plenty to digest.

There wasn’t much to note in the price action overnight as markets prepare themselves for a big week of data that kicks off today. While there was more tariff talk with Trump sending Secretary of Commerce Wilbur Ross over to Europe to negotiate, the US Treasury auctions were arguably more important.

The market easily absorbed another round of US Treasury auctions as a reasonable amount of 3 and 10 year bonds were offered to the market. At the close bond rates finished a little lower and with so much speculative short interest, it is going to take another significant catalyst to drive longer bond rates higher from here in the near term.

Interestingly, we are seeing short end rates on the rise, lead by Libor in the US. While it is widely expected that the Fed will hike next week and potentially flag another 3 hikes over the remainder of the year, 3 and 6 month Libor have been rising. Whether it is one of the drivers or pure coincidence, BBSW in Australia has been following Libor higher over the past couple of weeks (see chart).

It will be a big day in Australia with the NAB business survey for February due out along with January lending data. It will be interesting to see how long businesses remain optimistic as the outlook for consumers remains subdued. Also out today is the Curve Monthly Insights where will dissect the data whilst providing an update from the RBA and why they could find themselves squeezed between a rock and a hard place.

Then later tonight we get CPI in the US, which will be something to watch ahead of next weeks Fed meeting.

David Flanagan

Director - Interest Rate Markets