Daily Commentary BY THE CURVE TEAM –

Contrasting Forces to Influence Near Term

15th of March, 2021

Continuing positive news is being tempered by covid risks.

Unsurprisingly, there was another kick in US bond yields following the passing of the stimulus bill. US 10-year treasuries were at 1.62% at the end of Friday and are expected to rise even further today.

The stimulus is expected to be an impetus for spending and activity. 5 and 10-year inflation expectations in the US are now 2.7%.

Australian yields will likely be influenced by the US. However, covid cases in Queensland and NSW over the weekend were a reminder of downside risks.

State government’s policies of eliminating the virus are the reason for the downside risk. Even though vaccine distribution has begun, as long as this policy remains then covid will continue to pose a downside risk to the economy.

There is a busy week of data and updates ahead. Lowe is speaking at a Business Conference today, which precedes the RBA’s meeting minutes for the March policy decision released tomorrow.

Assistant Governor Chris Kent will also be speaking on Tuesday and Wednesday. His speech on Tuesday is about small business finance, which could be of interest given the recent announcement of the government’s Recovery Loan Scheme and the remaining near $100 billion of TFF available.

In terms of economic data, employment for February is released on Thursday and preliminary retail sales for February are released on Friday.

Josh Stewart

Associate - Money Markets