Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – U.S. Labour Market Remains Strong

Monday, 11th July, 2022

Daily Flows

  • We saw markets and trade activity cool a little last week from recent turmoil.
  • Many sat on the sidelines awaiting the official RBA announcement in the first half of the week, while some banks secured solid funding in the second half of the week, taking some of the edge off of the fierce competition for funding we have seen in recent weeks.
  • Judo Bank were a highlight throughout the week, detached from the rest of the market across both TD’s (1-year 4.17%) and NCD’s (3-month +40). They have decreased their term deposit levels today with 1-year back at 3.80%, but their standout NCD margins remain.
  • There were some pockets of strong opportunity throughout the week as many ADI’s came to market to seek significant and quick funding. For example 6-month BBB+ TD’s reached as high as 3.60%, with similar short-term opportunities running rife in recent weeks.
  • CIBC launched 3-year floating and fixed lines on Friday, with final pricing at 3mBBSW / SQ ASW +93bps. The issue was sizeable, printing a total of $2bn with a skew towards the FRN.

U.S. Payrolls Strong

  • June Non-Farm Payrolls highlighted the strength of the labour market and did nothing to ease recession fears.
  • Jobs rose 372k, whilst expectations were 265k and the unemployment rate remained at 3.60%
  • While the market remains so tight, the Fed are forced to take a more aggressive stance on Monetary Policy.
  • This data places more support on a 75 basis point hike when the Feed meet later this month.

Week of Data Ahead

  • This week sees consumer confidence, business confidence and employment data locally.
  • The employment data is a vital piece of information for the RBA, who need to judge whether another 50 basis point hike is necessary.
  • CPI data is released in the back end of this month, which could overshadow the employment data if the print surprises on the upside.
  • The combination of both of these reads will provide the foundation of Australia’s monetary policy moving forward.

Lawrence Vosper, Nicholas Allan

Curve Team