Daily Commentary BY THE CURVE TEAM –

Daily Flows and Insights – Consumer Confidence & Fed

16 December, 2021

Curve Flows

  • We have seen strong flows activity with AMP Bank as they open the doors to financial institution term deposits for the first time in 7 years, as investors take advantage of solid rates across the curve (3m 0.85%, 5m 1.00%, 12m 1.10%).
  • 3 month NCD flows remain steady, with First Commercial Bank lifting their rates for 3 months.​​​​​​
  • A large number of long-dated FRNs continue to trade at a discount, with several trades in the June 2026 Bendigo line (+76).

Consumer confidence

  • Fell slightly in December, down to 104.3 from 105.3.
  • NSW and Victoria led the falls, down 3.6% and 3.5% respectively.
  • Time to buy a major household item was down 5.3%, as higher interest rates for home loans have become prominent.

Fed

  • The Fed dot plot, which shows the forecasts from all Fed members, shows three rate hikes in 2022 are expected. This was slightly more than markets had priced in prior to the meeting.
  • They also confirmed that QE tapering would double in speed, so there will be $30 billion less purchases per month so QE should end before mid next year.
  • The Fed are forecasting inflation of 2.6% annually by December next year, which seems at odds with the current levels of price growth.

Daily Commentary BY THE CURVE TEAM –

Daily Flows and Insights – Consumer Confidence & Fed

16 December, 2021

Curve Flows

  • We’ve seen moderate flows into smaller ADIs as their appetite increases before the Christmas period, with several banks still offering around 0.80% for 3 month term deposits.
  • Investors have been rewarded for tenor; with Bank of Queensland 2-year (1.10%), Judo Bank 3-year (1.60%) and AMP 4-year (1.75%) rates.
  • We are still seeing strong flows into major bank FRNs across 2023-24  maturities, with Macquarie Bank and Suncorp popular in the 2025-26 space.

Consumer confidence

  • Fell slightly in December, down to 104.3 from 105.3.
  • NSW and Victoria led the falls, down 3.6% and 3.5% respectively.
  • Time to buy a major household item was down 5.3%, as higher interest rates for home loans have become prominent.

Fed

  • The Fed dot plot, which shows the forecasts from all Fed members, shows three rate hikes in 2022 are expected. This was slightly more than markets had priced in prior to the meeting.
  • They also confirmed that QE tapering would double in speed, so there will be $30 billion less purchases per month so QE should end before mid next year.
  • The Fed are forecasting inflation of 2.6% annually by December next year, which seems at odds with the current levels of price growth.

Josh Stewart

Associate - Money Markets