Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Bullard Very Bullish, Oil Down

Thursday, 4th August, 2022

Daily Flows

  • Flows were consistent yesterday with banks starting to come looking for funding again.
  • Notably there was a 4.25% 12 month TD by a domestic BBB bank. This is incredible value given that it is trading more than 100 basis points over the reference rate.
  • NCDs continue to hover around +30 for 3 months, with the stand out still being Judo at +40.

Fed Speakers Say More Aggression To Come

  • James Bullard, President of St. Louis Fed, was quoted saying last night that the Fed should “front load” increases.
  • Further to this, Bullard indicated that the cash rate should be 3.75%-4.00% by year-end.
  • Bullard’s reasoning was that inflation needs to be combatted, regardless of any potential economic downturn.
  • Price action on treasuries was interesting, with the 10Yr initially selling off before rallying 4 basis points stronger than open. The 2Yr continued the upward projection, selling off around 4 bp.

Commodities Sell Off

  • Commodities are seeing a strong sell-off in price.
  • Most notably is oil, which is trading around $95 USD a barrel – a level which is close to the start of the war.
  • There is no clear indication why oil is decreasing, with OPEC+ releasing an insignificant increase in production (100,000 barrels a day).
  • This is good news for the broader economy and places less inflationary pressures on input costs.

Nicholas Allan

Senior Associate