Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Business Confidence Low, Conditions Falling

Wednesday, 13th July, 2022

Daily Flows

  • The BBB rated Credit Union SA experienced strong flows again in the NCD space yesterday. Leading 3-month NCD rates remain around +30 to +35, with Judo Bank still a highlight above the market at +40.
  • We saw very strong bond flows yesterday across a range of maturities from 1 to 5 years, with a focus on major bank floating lines. While margins and yields are currently sitting below equivalent TD rates, the liquidity and rate flexibility offered by bonds has proven attractive to some investors amidst current market volatility.
  • Bank of Queensland pulled out from their 2.5-year bond mandate last night after making the expression of interest on Monday. This was driven by a range of reasons, but raises interesting questions for the broader funding capacity of ADI’s in the current climate.

Business Confidence Low, Conditions Falling

  • Yesterday, NAB’s Business Confidence and Conditions were released for the period June 20th – 3oth.
  • Confidence fell by 5 points to +1 – a data point that lies well below the long run average.
  • Labour costs, input costs and supply chain disruptions are the largest factors that businesses are facing, all of which are putting bottom-side pressure on their profit margins.
  • Whilst confidence is lying below the long-run average, conditions are above. This is despite conditions falling 3 points to +13.
  • This print shows the resilience of the economy that the RBA has been addressing, with household balance sheets strong enough to absorb rate hikes.
  • Only time will tell how resilient the economy is. However, as more data is released in the next couple of weeks, the RBA may be forced into placing more pressure on businesses and households.

Employment Data Today

  • Employment data is released today. Economists are forecasting a fall in the unemployment rate, to 3.80%.
  • This includes an employment change of 30,000 jobs and for the participation rate to remain the same.
  • The past months have seen greater than expected increases in the employment change, lifting the participation rate considerably. If this trend is to continue, then the employment rate may remain at 3.90%.
  • Within our monthly commentary, further analysis was placed on the impact of expat and foreign labour on the Australian economy. Click here to read

Lawrence Vosper, Nicholas Allan

Curve Team