Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Risk-Off Sentiment & Bank Runs

Tuesday, 12th July, 2022

Daily Flows

  • Flows were quite standard to start the week. Smaller BBB ADI’s such as Credit Union SA attracted solid funding within the NCD space off the back of significant funding demand.
  • There was a mandate for a 2.5-year Bank of Queensland bond issuance, which may launch in a fixed and/ or floating format later this week.

Equities Red, Bonds Red

  • Last night saw a big change to risk sentiment, with equities sellling off considerably.
  • Bond yields also fell as investors sought safe havens.
  • 10Yr Treasuries are now under 3%, falling by close to 10 basis points overnight.
  • This price action is expected to continue in the Australian market today.
  • Markets are fearing recession and with the earnings season kicking off in the U.S. currently, equity investors are nervous.

Chinese Banks Seeing Troubling Runs

  • In China, banks have frozen deposits and are not allowing investors access to funds.
  • It comes as more pressure is mounting on real estate companies in China, who are unable to make their debt obligation payments.
  • Evergrande made headlines last year as they nearly defaulted on a sizeable USD repayment. Now, there are a list of names which can be added to the list, all of which are property developers.
  • The fear within the markets is how much contagion risk is there, if these developers cannot make their obligations.

Lawrence Vosper, Nicholas Allan

Curve Team