Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow and Insights – Market Volatility Surges as Tensions Build

25th of January, 2022

Daily Flows

  • Macquarie Bank NCDs are proving popular, with strong flows into terms across 6 month to 1 year tenors. Their 1-year rate is the highest we have seen in the A rated space. Several overseas names continue to look for NCD funding this week.
  • Another BBB domestic ADI came to market for TDs yesterday, sparking further activity in this market. A BBB+ bank garnered attention from those seeking longer tenor, offering 1.60% for 3 year money.

Volatility Rises as Tension Builds

  • The S&P 500 suffered its worst intraday fall since the March 2020 crash overnight, before powering back to regain the 4% loss by close.
  • The Euro Stoxx 50 dropped 4.1% as tensions on the Russia-Ukraine border continue to heat up.
  • NATO has now sent ships and aircraft to the region, while EU officials and the U.S. Secretary of State announced increased assistance to Ukraine.
  • The VIX index – a key measure of market volatility – has increased 38% over the past week.
  • Bonds rallied and the USD has risen modestly as a broad risk-off sentiment builds.

Rate Rise Fears

  • Inflation concerns continue in the US, intensifying expectations of a hawkish Fed meeting on Thursday morning, with some now expecting them to end their QE program immediately.
  • Expectations of a cash rate rise are also accelerating in Australia despite persistent Covid cases and geopolitical fears.
  • Local CPI data is released at 11:30 today, with the market expecting 2.3% YoY.
  • If the figures surpass the RBA’s expectations, it could have a significant impact on the timing of a hike.

Lawrence Vosper

Associate - Money Markets