Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Business Not As Usual?

Wednesday, 8th June, 2022

Daily Flows

  • We saw more than a dozen ADI’s looking for funds yesterday, and only limited investors looking to place. This reflects an increasing continuation of the negative funding gap we have seen grow in recent weeks.
  • As a result, ADI’s have had to substantially increase their rates to secure funds, which will be spurred on massively today by the 50bp RBA rate hike yesterday with big jumps in reference rates.
  • BoQ attracted solid flows yesterday maintaining some of the most attractive rates in the market, with their 1-year levels increasing by 30bps today.
  • +30 is again available for 3-month NCD’s. Intesa Sanpaolo have substantially increased their levels today, with 1-year NCD’s available at 3.33%.

Business Not As Usual? RBA Surprises.

  • The RBA surprised the market yesterday, lifting the cash rate by 50 basis points to 0.85%.
  • “Inflation has increased significantly … it is higher than earlier expected” the Policy Decision reads. “Global factors, including COVID-related disruptions to supply chains and the war in Ukraine, account for much of this increase in inflation.”
  • Further, the board stated that “Today’s increase in interest rates by the Board is a further step in the withdrawal of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic”.
  • As to future hikes, the RBA stated that “The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.”
  • Only 3 economists predicted the 50 point hike. It must be said that after last month’s “Business as usual” statement, the market will be turning to the Statement of Monetary Policy for further insight into the mitigating factors driving the decision.
  • Reference rates are expected to move significantly, providing investors with more return today.

Oil Continues to Climb

  • Oil prices are continuing their upward trajectory despite OPEC+ increasing their supply.
  • Recently, the OPEC+ region confirmed that they would alleviate oil prices by increasing supply by 650,000 barrels per day.
  • The market deemed this as insignificant, with global demand vastly overshadowing this supply increase.
  •  As such, WTI is now trading at 119 USD a barrel, while Brent is breaching 120.

Lawrence Vosper, Nicholas Allan

Curve Team