Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – European Inflation Hits Highs

Monday, 4th April, 2022

Daily Flows

  • Last week saw relatively mixed activity, with pockets of strong flows and a couple of quieter days as investors and borrowers took a breather to regather after recent volatility.
  • Term deposit rates continued their upward trajectory, with numerous ADI’s increasing levels to adjust to new references and competition. Macquarie Bank lifted their rates early in the week, featuring strong inflows particularly around their attractive 3 and 12-month levels. Bank of Queensland increased their offers to now show the highest rates in the longer end of the curve, with levels significantly above 3% available from 3-5 years.
  • AMP Bank also announced an increase in their TD rates later in the week, with their 18-month rate of 2.30% a particularly attractive standout.
  • NCD flows remained steady throughout the week, with margins largely unchanged from previous sessions, albeit based off higher benchmark rates. Opportunities for +20 from domestics persisted in the 3-month space, with +25 regularly available from foreign branch banks.
  • Strong value could also be found around 1-year NCD’s, with some levels on par or even above equivalent term deposit rates. Macquarie NCD’s were trading around 1.60%, on par with their term deposits, while Intesa Sanpaolo continue to offer standout rates with 1.80% available for 1-year funds, higher than any TD or NCD rate.
  • Bond activity picked up a little towards the middle of the week off the back of a strong rise in yields, with major bank fixed and floating lines proving particularly popular at levels still substantially above equivalent TD’s.

European Inflation

  • Inflation has grown at 7.5% YoY, with the largest increases coming from energy prices.
  • Energy prices have soured 44.70% YoY. European countries are feeling the pain of being too reliant on importing energy.
  • Russian gas and oil dependence is now the largest cause of concern, with the Rouble being demanded for payment.
  • This demand overcomes the sanctions placed on Russia by many Western Countries.
  • However, a deeper dive into the inflation read sees only a 3.40% increase in non-energy goods and 2.70% increase in services.
  • Remove the increase of energy prices and the read becomes less concerning. The longevity of the OPEC+ oil battle and Ukraine War could see the inflation read continue to skyrocket.

RBA Tomorrow

  • The RBA meet tomorrow for their monthly Monetary Policy Decision.
  • No rate hikes are expected, but the meeting will be closely watched as the market asks for more clarity surrounding when the hiking cycle will commence and how the inflation forecast has changed.

Nicholas Allan

Associate - Money Markets