Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Reference Rates Balloon

Friday, 29th April, 2022

Daily Flows

  • Yesterday saw an extraordinary day in rates movements, with nearly all active ADI’s adjusting their rates by as much as 30-40bps across the curve to adjust to rapidly changing reference rates.
  • Rates are now the most attractive they have been in more than 2 years, with several investors jumping on the opportunity yesterday.
  • Judo Bank continue to offer the highest TD levels at most terms, offering 1.30, 2.01 and 2.74% for 3, 6 and 12 months respectively.
  • ING are still showing very attractive levels particularly given the credit rating, showing 2.70% for 1 year and 3.97% for 3 year funds. Major banks are also showing strong and rising rates.
  • Fixed bond yields increased significantly yesterday as expected. 4.35% could be found on a BOQ October 2026 line, notably above equivalent TD levels. FRN margins held relatively steady but are of course increasingly attractive off of rising benchmark rates.
  • NCD outright rates are increasing in the same way, with 3-month margins available at +25 to +30.

Reference Rates

  • Reference rates increased significantly yesterday, as the market steers the RBA to increase the cash rate earlier.
  • 3-month BBSW increased by 17 basis points, while 6-month BBSW increased by 21.
  • The market is pricing in a rate hike next week when the RBA meets.
  • Inflation beating expectations has stirred up the market, causing significant sell off in interest rate markets.
  • With the market moving so quickly, price creators are struggling to keep up. Some ADIs found themselves setting pricing in the morning, and having to revise them come midday.

U.S. GDP

  • U.S. GDP came in softer than expected yesterday.
  • The consensus was for a seasonally adjusted increase of 1.00%, but rather GDP fell by 1.40%.
  • However, the breakdown of GDP displays more strength than the number leads on.
  • Personal consumption was up 2.70%, disposable income rose 4.80% and private investment up 2.30%.
  • The single largest factor pulling back GDP was a significant increase in imports, up 17%.
  • Equities were rather nonchalant about the read, drawing from the positivity of strong earnings released overnight.

Lawrence Vosper, Nicholas Allan

Associate - Money Markets