Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – ECB Are Slow & Steady

Friday, 10th June, 2022

Daily Flows

  • The rising rates continued yesterday with more term deposit specials. A domestic BBB+ ADI offered 2.20% for a 3-month deposit, and 3.85% for 13 months. Numerous ADI’s remain seeking funds to close out the week.
  • NCD flows were more limited yesterday, though 3-month margins continue to price around +25.
  • Bond activity was steady yesterday, despite some retracement in yield from the previous day. Several attractive opportunities remain available for investors seeking greater flexibility and liquidity. Major bank and domestic BBB+ names such as Bendigo Bank and BoQ have proven particularly popular, with a leaning toward floating lines.

ECB To Ease Into Hiking Cycle

  • The ECB has stated that they will end QE from the 1st of July and hike by 25 basis points next month.
  • Further, the ECB indicated that if inflation does not subside, a 50 basis point hike is likely at the following meeting.
  • Europe is being battered by serious energy and commodity price worries, which has been catalysed by the Ukraine War but was evident beforehand.
  • Providing the market with clear indication and advice on when rates will be increasing should smooth out some of the volatility within the market.
  • If inflation is to beat the ECB’s forecast, they may be required to become more aggressive in line with other central banks.

Covid Lockdowns

  • Shanghai is a very significant shipping port for Chinese exports.
  • Due to China’s zero covid policy, Shanghai has once again been placed into lockdown.
  • Supply chains are to remain disrupted for the foreseeable future while this covid policy remains.
  • This will place further upward pressure on demand induced inflation.

Lawrence Vosper, Nicholas Allan

Curve Team