Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Retail Sales Up, Fed Hikes

Thursday, 5th May, 2022

Daily Flows

  • We saw very strong activity yesterday as rates continue to increase after the RBA met earlier in the week, with numerous ADI’s repricing their TD rates.
  • MyState Bank (A-2/BBB) saw strong investment across both TD’s and NCD’s with some very attractive pricing.
  • Judo Bank (A-3/BBB-) increased their term deposit rates, now showing 1.35% for 3 months. Bank of Queensland and ME Bank also raised levels, now showing the highest rates we can see in the TD space across many terms.
  • Intesa Sanpaolo are the first to reach 3.00% for 1-year NCD’s! This is also higher than anything in the TD space.
  • ANZ have today launched 3 & 5-year fixed and floating notes, pricing very attractively above secondary market levels in recent days and offering great relative value.

Retail Sales Stronger Than Expected

  • Domestic retail sales data came out better than expected.
  • Markets were expecting MoM growth of 0.50%, however, the read came out as 1.60%.
  • When investigating this print, demand remained similar, and the upside was due to increased prices paid by consumers.
  • The data was for March, so future prints will provide great insight as to how consumers may be disincentivised to spend given inflation worries.
  • With retail deposits so strong, consumers may be willing to overspend. This will place further pressure on supply chains.

Fed Hikes 50 Points

  • Overnight, the Federal Reserve Bank lifted the cash rate by 50 points, from 0.50% to 1.00%.
  • This came as no surprise to the market. The yield curve steepened, and 10Yr treasuries remain above 2.90%.
  • The greatest development came from Powell’s speech, which dismissed the chances of a 75 basis point hike at the next meeting. Quantitative tightening will start in June.
  • When pressed about the chances of recession due to a tightening cycle, Powell stated that the Fed will try to ‘soften’ the effect on the economy. No further indication was given on how this would be managed.

Nicholas Allan

Associate - Money Markets