Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Central Banks Dictate the Week

Monday, 2nd May, 2022

Daily Flows

  • We saw an extraordinary week for rates moves last week, the likes of which we have not seen since the pre-pandemic era.
  • Reference rates moved enormously in April, with 3mBBSW rising from 0.53 on Tuesday to 0.71% on Friday, and almost tripled over the month.
  • ADI rates moved off the back of this, compounded by persistent liquidity pressures. Macquarie Bank and AMP increased their term deposit rates on Friday, offering reasonably attractive levels.
  • ING rates were a standout throughout the week, with 1-year and 3-year funds at 2.70 and 4.00% respectively. Judo Bank (BBB-) levels remain the strongest available in the TD space, showing 1.30% for 3 months and equally attractive levels across the curve.
  • NCD margins have remained strong off of the rising reference rates. +20 is available for 3-month funds from BBB rated domestic ADI’s, up to +30 for Judo Bank. Intesa Sanpaolo (BBB) continue to offer strong levels, showing 2.60% for 1 year NCD’s.
  • There were strong bond flows on Friday, with elevated yields in line with the broader market. Semi-government securities were particularly popular, offering strong levels for the AA+ high-quality liquid asset.

RBA Tomorrow & Data Heavy Week Ahead

  • The RBA meet tomorrow at 2:30 and announce their monetary policy statement.
  • Much debate surrounds whether a rate hike will be announced tomorrow, and whether it will be 15 or 40 points.
  • In the RBA’s last meeting, Lowe stated, “Over coming months, important additional evidence will be available to the Board on both inflation and the evolution of labour costs.”
  • Wage data is released on 18th May, so the RBA may be patient and wait for this print. However, most economists are discounting the importance of this wage data considering the surge in inflation.
  • Domestically, we see a large amount of data: retail sales, Home loans Value, Trade Balance, Building Approvals & Foreign reserves.

FOMC Meeting

  • The Fed meet on Thursday to announce their monetary policy decision.
  • A 50 point hike is almost certain. However, the market is now pricing a 75 point hike for the next meeting.
  • Therefore, the Fed’s inflation, wage, and GDP forecast becomes more important as the market searches for direction.

Lawrence Vosper, Nicholas Allan

Associate - Money Markets