Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow and Insights – RBA To Raise By April

Friday, 21st January, 2022

Daily Flows

  • TD activity has continued within the BBB space, with Bank of Queensland lifting their longer-term rates to levels above 2% for 5 years.
  • BoQ also tapped their May 2026 FRN line. The re-offered was 8-10bp wider than where the secondary market was trading which has pushed out all the margins on the their longer dated bonds.
  • For those looking at NCDs out to a year, we have seen a pickup in bond yields around this tenor. For example, 1-year major bank fixed lines were yesterday trading around 0.70%. Thus, making an alternate option to an NCD.

RBA To Raise By August

  • Westpac’s Chief Economist, Bill Evans, has revised Westpac’s outlook for interest rates.
  • The information was released yesterday at 10:30am, stating that “We now expect one hike of 15 basis points in August to be followed by a further hike of 25 basis points in October”.
  • Evans, even prior to this release, called out the RBA, originally claiming rates will be raised in Feb 2023.
  • Evans foundations for the rate rise lie on inflation expectations, which he suspects will be 2.60% in March and 2.90% by June, 2022.
  • At this point, inflation will lie between the 2-3% for 3 consecutive quarters, as per the RBA’s target.
  • In response to this data we saw some activity in the swap market, but settled shortly after.

Employment Data

  • Unemployment fell to 4.20%, from 4.60%.
  • The participation rate remained the same, at 66.10%.

The Market – At The Time of Writing

  • Aussie Government Bonds Resting at:
    • 2Yr – 0.925
    • 5Yr – 1.642
    • 10Yr – 1.957
  • ASX200 – 7342.39
  • AUDUSD – 0.7229

Nicholas Allan

Associate - Money Markets