Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Pressure is Building

Friday, 24th June, 2022

Daily Flows

  • Rates slid further yesterday as a strong market recovery continues.
  • However, flows remained quite strong as a significant negative funding gap persists, with numerous ADI’s quite consistently on the search for deposits.
  • Market leading 12-month rates remained at 4.00% from a BBB+ name, with broader market rates sliding significantly. We have seen major bank 12-month rates fall by almost 50bps since the start of the week for example.
  • An unrated domestic ADI is offering an outstanding 2.45% for 3-month TD’s today, the highest level we have seen since the initial rate lift.

Pressure is Building

  • Markets are fickle beasts as witnessed by the volatility that ensued after a number of not so privative central bank musings over the past week.
  • While reference rates have continued to retreat into the end of the week, the prevailing supply and demand in-balance in funding markets appears set to explode.
  • When markets are in a state of flux like the current prevailing conditions, you can either sit back and wait for things to calm or you can take decisive action in order to achieve outcomes
  • With year-end quickly approaching there will be ADI’s who will sit back and hope for things to calm and others will be more aggressive in attracting what they require to meet year-end targets.
  • This creates a great opportunity for those who have run up some surplus funds heading into year-end to test the market when they know they have the capacity to do so.

Lawrence Vosper, David Flanagan

Curve Team