– Daily Flows & Commentary BY THE CURVE TEAM –

Wednesday, 1st June, 2022

Daily Flows

• It was a relatively strong day in flows yesterday, spurred on by ADI’s pushing rates to higher and higher levels in search for funding.
• A BBB domestic name offered 1.80 and 2.60% for 3 and 6 months respectively, and secured notable funding at these levels.
• An unrated ADI showed 1.90% for 3 months, the highest level we have seen in the current environment.
• Unrated to BBB deposit takers are now needing to price at 1.70% and above to attract funding, but conditions are changing daily depending on ADI needs on the day.

First House Price Fall Since 2020

• National house prices fell 0.3% in the month of May, the first national decline since September 2020.
• This comes after calls from AMP’s chief economist yesterday that we could well see declines of 10% of greater this year.
• This fall has of course partially been spurred by increasing interest rates after the RBA’s 25bp hike last month.
• If today’s GDP report is particularly strong, this could add further downward pressure on the housing market through this mechanism.

GDP Release

• Australia’s Q1 GDP print is released at 11:30 this morning.
• The eyes of the market and the RBA will keenly watch this report, with a key focus being implications on wages.
• Partial data already released has suggested a sharp increase in growth to around 5% YoY, which would have significant implications on RBA and broader economic policy decisions.
• If this data proves correct, it will bolster support for a 40bp cash rate hike at next week’s June meeting.