Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Political Winds Change, RBA No Rush For QT

Monday, 23rd May, 2022

Daily Flows

  • It was a whirlwind of activity last week as the negative funding gap environment really came to the fore.
  • There was strong competition between ADI’s to secure funding, with rates marching upwards through the week.
  • NCD’s have been trading at margins of +25 for 3 months, with 3mBBSW pricing at 1.04% on Friday. NCD activity was particularly notable on Friday with many attractive alternatives available.
  • A domestic unrated ADI who has never before taken wholesale funding came to market last week, offering a standout 1.70% for 3 month TD’s. Judo Bank (A-3/BBB-) briefly lifted their rates, with a 3.25% 1-year TD; while ING (A-1/A) secured steady funding through the week with a 3.11% 1-year offer.
  • Bank of Queensland (A-2/BBB+) received notable funding on Friday after increasing their TD rates, which are now the highest available in the market across many terms.
  • ING launched a new bond issuance on Tuesday, spread across 3-year fixed (4.00%) and floating (+78) lines, as well as a 7-year fixed (4.50%) tranche.

The Election We Had to Have

  • The Australian people have spoken and it is clear that they desire more from their politicians.
  • Looking past the fact that Labor is now in power, both parties saw their primary vote fall.
  • There was also a big swing towards independent candidates, especially in Liberal heartlands.
  • Australia has been in a political quagmire for decades with little in the way of major policy or progression seen and the Australian public want more.

RBA No Rush on QT

  • Appearing this morning at the Kanga News DCM conference, Assistant RBA Governor Christopher Kent confirmed that the RBA won’t be rushing to engage in active quantitative tightening.
  • Instead the RBA will let their portfolio run down as their holdings mature, giving the market certainty about the implications QT will have on supply and demand dynamics in bond markets.
  • This path is not set in stone and the RBA will remain open to changing course should the situation require it.

Lawrence Vosper, David Flanagan

Curve Team