Daily Flows & Commentary BY THE CURVE TEAM –

Daily Insights and Flows – Disappointing Data & The Week Ahead

Monday, 17th January, 2022

Weekly Flows

  • Last week was a big one for primary bond issuances. Commonwealth Bank came to market on Tuesday with the biggest FRN print in AUD history – a massive $3.1bn at 3mBBSW+70 bps. They also printed a $900m fixed line with an issue yield of 2.43%. The next day Japanese bank Sumitomo Mitsui launched a sizeable Australian FRN at 3 (3mBBSW+57) and 5 year (3mBBSW+78) terms, printing $1.5bn. On Friday, Suncorp released a mandate for a 5-year issuance of their own, with indicative pricing currently sitting around 3mBBSW+83. Books are now open.
  • Several unrated ADI’s continued to compete for funds out to 12 months, seeing rates rise as high as 0.80% and 0.90% for 3 and 6 months respectively. These levels are only marginally behind the market-leading AMP (0.85% for 3m) and Judo Bank (0.92% for 6m) rates, which continue to present an attractive opportunity to those with capacity.
  • On Friday afternoon Macquarie announced a significant lift in their 2-5 year TD rates, effective today. Their two year rate for smaller parcels has almost doubled to 1.15%, offering a solid home within the A-rated space.

Disappointing Data

  • U.S Retail sales fell 1.90% for December, Month on Month (MoM). Control group sales were down 3.10% MoM).
  • Industrial production fell 0.10%. This was driven by a significant decrease in the automotive industry which fell 1.30%.
  • Interestingly, a normal bond buying pattern did not occur, with yields selling off (10Yr Treasury at 1.78%, up 6 basis points).
  • It comes as inflation data remained high throughout last week. The Curve has started to flatten over the recent months, with the 2Yr resting at 0.97% and the 30Yr at 2.12%
  • The New York Fed President, John Williams, has said that it would be “sensible” to tighten monetary stimulus.
  • The market is now expecting up to 6 hikes next year. This is largely to reduce inflation. However, the Fed has spoken about the need to wind down their balance sheet, to the magnitude of up to $600 billion USD, which in effect, will reduce monetary stimulus further.

In Australia

  • The week ahead will show the release of employment data. This will be a very crucial release to see how Australia is tracking to “maximum employment”.
  • Housing Finance data was strong on Friday. Banks continue to lend at high levels as consumers take advantage of low, fixed rates and the housing market has started to taper.
  • The funding dynamic has started to shift within the market, as banks chew through the TFF money and the funding gap returns to somewhat pre-pandemic levels.

The Market – At The Time of Writing

  • The Aussie 2Yr rests around the 0.72%, 5Yr at 1.567%, and 10Yr at 1.92%.
  • AUDUSD – 0.7210
  • ASX200 – 7393.86

Nicholas Allan

Associate - Money Markets