Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Central Banks Pave the Week Ahead

Monday, 6th June, 2022

Daily Flows

  • It was a noticeably busier week of activity last week above the week before, with ADI’s pushing rates even higher to garner investor attention.
  • Numerous ADI’s continue to seek funds across terms and credit ratings, with this environment expected to persist until at least the end of the financial year.
  • Several smaller unrated names are particularly eager for funds, with 1.90% for 3 months the new norm for those seeking funds. Further along the curve, 3.25% is available from BBB+ ADI’s.
  • +30 for 3-month NCD’s was briefly available from a domestic BBB ADI, with +20-25 remaining the standard market level.
  • On Thursday, the previously unrated Gateway Bank announced that they had received a credit rating from Moody’s of Baa2/P-2, attracting steady flows as a result.

Central Banks Pave The Week Ahead

  • This week sees the RBA and ECB meet. Both monetary policy decisions will be closely watched, and the market is placing serious pressure on both banks to become more aggressive.
  • The market is calling for a 40 basis point hike from the RBA, bringing the cash rate from 0.35% to a round 0.75%. However, the RBA’s rhetoric from the last meeting was “Business as usual”, indicating a disregard for the cash rate to return to clean 25 basis point increments.
  • Turning to the ECB, there is large pressure mounting on the ECB to commence their tightening cycle. The bank is still very accommodative, with incredibly low rates and purchasing assets. Their asset purchasing program is also expected to be terminated.
  • Eyes will also turn to the Fed, with a CPI read coming this week. If CPI is to surprise, more pressure will be placed on an already aggressive Fed.

Melbourne Institute Inflation

  • 11am today sees the release of Melbourne Institute inflation.
  • This will provide the market an indication of future inflation prints.

Lawrence Vosper, Nicholas Allan

Curve Team