Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow and Insights – Stumbling Data & the Week Ahead

24th of January, 2022

Weekly Flows

  • Last week saw very strong activity for ADI primary issuances, especially at the 5-year term. Suncorp (AA-) printed $775m in FRNs (3mBBSW+78) and Westpac AA-) issued 2.75bn across floating and fixed notes at +70, on par with CBA’s bond launch the week prior. Rabobank (A+) came to market with a $700m 5-year FRN at +73.
  • There was healthy flow across the BBB rated TD space, especially at tenor. ADIs were offering rates as high as 1.30% for 2-years and 2.05% for 5-years, with similar opportunities likely to persist into the new week.
  • We saw increased NCD appetite from domestic and foreign names across the board, with rates sitting at +20 for 3 months. Pockets of relative value above NCDs have also remained within the bond market.

PMI Drops

  • Australian PMI figures were released this morning, indicating the first contraction in the services sector in four months (45 vs 55.1).
  • Manufacturing growth slowed to the lowest levels in five months (55.3 vs 57.7).
  • These results come in the face of Omicron, as backlogs grow and businesses face heavy worker disruptions.
  • Business optimism was also hit, falling to the lowest level since April 2020.

UK Retail Sales Falter

  • December UK retail sales fell 3.7% MoM, as the surge in Omicron leads to new restrictions.
  • Nonetheless, retail sales grew 5.1% for 2021 as a whole, its strongest growth rate since 2004.
  • Tensions continue to build on the Russia-Ukraine border, likely to drive further uncertainties and a broader risk-off sentiment across Europe.

The Week Ahead

  • Q4 inflation data is released tomorrow, a key driver behind RBA decision-making. The trimmed mean expectation is for 2.3%, sitting comfortably within the RBA’s target band.
  • The NAB Business Survey also comes out tomorrow, hopefully adding further clarity around how the economy is coping with Omicron.
  • The Bank of Canada are expected to lift interest rates later in the week, while the Fed meet on Thursday morning.
  • Aussie PPI is released on Friday.

Lawrence Vosper

Associate - Money Markets