Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Fed Gets Serious With Cash Rate Hikes

Thursday, 16th April, 2022

Daily Flows

  • Flows continued recent trends, with busy activity across several ADI’s and strong negotiation opportunities with ADI’s very keen to retain funding.
  • BBSW continued to climb, with 3mBBSW reaching 1.71%, further increasing the attractiveness of NCD’s and floating rate bonds – a great investment option for those looking for greater liquidity and rate flexibility amid current market volatility.
  • Judo Bank have significantly increased their TD rates today to the highest we are currently seeing, with their 1-year level of 4.15% a particular standout.

Fed Hikes 75 Basis Points

  • The U.S. Federal Reserve lifted the cash rate by 75 basis points overnight. This is the largest hike since November 1994.
  • The market largely anticipated this move after the higher than expected inflation print last Friday.
  • Jerome Powell stated that the Fed is “strongly committed to returning inflation to its 2% objective”.
  • As to how far rates will go, the dot plot median now suggests another 150 basis points by the end of the year.
  • There are 4 meetings until year end, so the question now lies with how aggressive the Fed will continue to be.
  • Treasuries fell in response, with the 10Yr falling around 20 basis points, while the 2Yr fell 22 basis points.

Employment Data To Come

  • Today sees the release of employment data.
  • Markets are currently expecting a fall in employment to 3.8%, with 25,000 new jobs created.
  • Whilst the labour market is so tight, further pressure will remain on inflation. An understated print would not be unwelcomed by the RBA, with the increase to minimum wage coming through the pipeline.

Lawrence Vosper, Nicholas Allan

Curve Team