Daily Commentary BY THE CURVE TEAM –

Daily Flows and Insights – RBA Minutes

22 December, 2021

Curve Flows

  • Several ADIs continue to present opportunities as they look to finalise funding positions before the new year. Unrated banks are offering around 0.85% for 3 month money, while other ADIs in the BBB+ rated space seek funds out to a year at 0.70%
  • We have seen a notable lift in ADI and semi-government FRN offers into year-end as issuers look to make last minute adjustments to their balance sheets, with several lines trading at a discount.

RBA Minutes

  • The RBA will at least taper QE in Febraury.
  • They outlined they will either taper QE and review in May, taper in February and end QE in May, or end QE all together.
  • RBA forecasts imply they will taper QE in February and end the program in May.
  • However, the economy has continually overdelivered when not in lockdown, so there is every chance strong data leading up to February will result in an end to QE.
  • Covid is the obvious spanner, which could subdue activity as people are forced into isolation or fear the virus.

Different to the US and UK

  • The minutes outlined key differences between Australia and the UK and US.
  • Australia has had much more subdued price pressure on energy prices.
  • Wages were also much more subdued, with the RBA’s liaison program anticipating rises of 2.5% over the next year.
  • In the US, high numbers of resignations are pushing wages higher whereas in Australia this is much less apparent.

Josh Stewart

Associate - Money Markets