Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flows and Insights – US Data Drop

Monday, 10th January, 2022

Weekly Flows

  • We saw a steady start to the year with the first week back. While many remain in a holding pattern until the holiday dust settles, we still saw notable activity in the market.
  • A few unrated banks sought funds, but without the strong competition we saw before the Christmas break, resulting in more subdued rates (0.60% for 3 months). We expect to see activity here continue into the new week, potentially creating attractive opportunities for a short time.
  • While bond activity amongst certain investor types remains quiet as many come out of holidays, market volumes was elevated as many larger banks looked to offload securities. This created several opportunities across the curve, with many longer-dated lines also trading at a discount, resulting in possible capital gains opportunities.
  • Judo Bank (A-3/ BBB-) lifted their longer-term NCD rates, now at +32 for 6m and +45 for 1yr. For those with capacity, these are some of the highest NCD rates we have seen in a while.

U.S Employment Data Sings Inflation

  • Non-farm payroll jobs were soft, rising by half of the expected (199,000 v.s 450,000).
  • Unemployment fell 0.30% to 3.90%.
  • Average hourly earnings increased to 0.60% month on month. This brings the annual rate to 4.70% year on year.
  • Once again, this data emphasises the inflationary labour market. It is no longer a question of IF the Fed will tighten, but WHEN.
  • In the Euro area, December inflation data hit a high of 5.00% year on year.

Market Movements

  • Equities sold off in response to the U.S data.
  • U.S longer dated bonds pushed out a couple of points, to 1.76%.

Nicholas Allan

Associate - Money Markets