Daily Commentary BY THE CURVE TEAM –

Daily Flows and Insights – Market Jitters

21st of December, 2021

Curve Flows

  • We saw strong flows into NCDs yesterday, centred heavily around the 3 month term. There was particularly strong investment into Judo Bank (A-3/ BBB-), offering +20 for 3 months as they continue to grow their loan book.
  • Judo Bank term deposits also remain popular (0.80% 3mth, 0.92% 6mth, 1.10% 1yr), offering an alternative to AMP in the BBB space.
  • Bond flows continue heading into Christmas. Many lines still hold relative value over other investment options, but are largely moving sideways and may continue to do so until further clarity on central bank decisions and Covid developments in the new year.

Market Jitters as Omicron Spreads

  • Markets are on edge heading into thin trade over the holidays as Omicron continues to spread.
  • Equities continue to feel the pressure of Omicron while long bond yields continue to fall on the long term risk to the outlook and potential impact of central bank tightening.
  • On the surface it appears that Omicron will be far more infectious but doubt remains over its severity.
  • Until more data is available, markets will remain cautious which could result in much higher volatility over the coming weeks due to the low volume over the holiday season.

RBA Update

  • The RBA remains staunch in its conservative outlook, still at odds with the market.
  • Other central bank actions don’t appear to be enough to sway the RBA towards a more hawkish tone.
  • We will get further insights into the latest RBA thinking with the release of the minutes from their December meeting which will be released later today.

David Flanagan

Head of Money Markets