Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Technical Recession and Retail Sales Fall

Friday, 29th July, 2022

Daily Flows

  • Yesterday saw moderate flows but reduced returns after the fall in reference rates.
  • +35 was offered by one ADI for a 3 month NCD, which compensated investors for the fall in BBSW. This special went quickly.
  • Unrated ADIs repriced their term deposits, offering 2.70% for 3 months.
  • Reference rates have fallen again today, by a considerable amount in the longer tenors.

U.S. GDP Misses

  • U.S. Q2 GDP printed negative for a second time in a row, signalling a technical recession.
  • The read came in at -0.90% annualised, which was expected as 0.40%.
  • Personal consumption data also came in weaker than expected, at 1.0% verse 1.20% expected.
  • Whilst the effect of rising rates is taking its toll, Jerome Powell was very clear about inflation being the focus for the Fed.
  • The ‘technical recession’ was heavily dismissed by Powell, yet the market seems to have responded significantly to the data.
  • Equities surged, with major indexes seeing over a percent increase. It comes as the weakening economy may mean that the Fed may not have to hike as much.
  • U.S. Treasuries rallied overnight, falling over 12 basis points in the 10Yr.

Retail Data Softer Than Expected

  • Yesterday saw domestic retail data released for June, which came in lower than expected.
  • The market was calling for a 0.50% increase, but the print saw 0.20%.
  • A large amount of the increase can be attributed to an increase in price, rather than demand.
  • Consumer spending may be showing the first signs of weakening as financial conditions tighten.

Nicholas Allan

Curve Team