Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – RBA Spooks Housing Market

Monday, 11th April, 2022

Daily Flows

  • Last week saw a slightly more calmed week in terms of trade activity, at least relative to the incredible flows in recent weeks. We experienced substantial market volatility and subsequent flows on Wednesday, with 3mBBSW rising 5bps to 0.28%, a 2-year high. Markets were otherwise somewhat more settled through the week.
  • There were several notable lifts in ADI term deposit rates as borrowers continue to adjust to rising markets and shifting funding pressures.
  • AMP announced an increase in their TD rates effective today, with their 1-year (1.95%) and 18-month (2.80%) rates particular standouts. Macquarie Bank have also lifted their rates today, with highly competitive levels for the A+ credit rating. The majors also continue to price competitively across the curve.
  • NCD outright rates have continued to rise in line with the historic movements in benchmark rates. Domestic ADI’s continue to offer +15 – +20 for 3-month funds, against 3mBBSW reaching 0.29% on Friday. Intesa Sanpaolo’s 1-year rate reached a stellar 2.07% on Friday, falling back slightly today to a still-unmatched 2.05%.

RBA House Price Prediction

  • The RBA published a report on Friday, which shook property investors around Australia.
  • The RBA stated that if rates increased by 2%, house prices are predicted to fall by 15% over a 2 year period.
  • Whilst this statement seems extreme, further analysis must be done. An excerpt below offers a great summary:
    • It is important to understand what this means. First, house prices typically rise in real terms. The baseline the RBA refers will be an upward trend. Second, once inflation is taken into account the nominal fall in house prices will be less than the real. Combining these two effects means the RBA’s estimate of the potential decline in nominal house prices if interest rates rise 200bp is much less than 15%.

UN Food Prices

  • The UN’s global food index soared 13% in March.
  • Since 2020, the increase is 50%.
  • Inflation is starting to be felt throughout the globe, and hitting people where it hurts.

Nicholas Allan

Associate - Money Markets