Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Lowe Rules Out 75

Monday, 27th June, 2022

Daily Flows

  • It was a somewhat quieter week in flows last week as we approach the end of the financial year. This trend could continue into this final week, or we could see a flurry of activity as banks and investors alike look to square up their balance sheets before year-end.
  • We saw a dramatic slide in rates, with major bank 1-year TD’s falling almost 50bps over the course of the week. The strong march up in reference rates was put on hold, with 3mBBSW falling more than 10bps from a Tuesday high to close the week at 1.74%.
  • We saw TD levels as high as 4.15% for 1-year BBB+ funds, before largely retreating. Bank of Queensland maintains the highest TD rates across much of the curve.
  • NCD activity remained steady and largely unchanged, with +30 3-month deposits available from several ADI’s. A +40 3-month special was available on Friday, and is on offer again today as some ADI’s seek to get ahead of the EOFY.
  • We received a 3-month TD offer for 2.50% from a domestic unrated name on Friday. The special garnered some attention, although investor funds have remained quite limited as a negative funding gap persists.

Lowe Confirms 75 Ruled Out

  • Governor Lowe spoke at a conference in Zurich over the weekend.
  • Lowe resonated that the Australian Economy remains resilient. Further, Lowe stated, “I’m not expecting there to be a recession, but we are on a narrow path back to low inflation.”
  • Rate hikes will be conducted in 25 or 50 basis point increments, with 75 being ruled out. The reason being, “We can navigate that path (to normal inflation), but there are risks — and the risks come both from the global economy and the uncertainty around households and how they are going to respond to higher interest rates.”

U.S. Housing

  • The U.S. housing market continues to soar as May results saw an increase of 10.70% MoM.
  • Demand for housing is yet to be affected despite interest rates increasing.
  • It may be a case of consumers trying to get into the market before rates really explode. However, this print will be of concern to the Federal Reserve.

Lawrence Vosper, Nicholas Allan

Curve Team