Daily Flows & Commentary BY THE CURVE TEAM –

Daily Insights and Flows – Inflation Inflation Inflation

Thursday, 13th January, 2022

Daily Flows

  • We are currently seeing a really nice equilibrium between investors and deposit takers across both TDs and NCDs. Yesterday saw numerous investors looking for homes, and an increasing number of ADIs offering one.
  • There is particularly strong activity around the 3 month term, with 0.70% now the going rate for TDs outside of the persistently high rates of AMP and Judo Bank (0.85% and 0.80% respectively). Leading NCD 3 month rates continue to hover around +15 to +17.
  • Japanese bank Sumitomo Mitsui (A-1/A) yesterday printed another large FRN issuance after CBA’s record raise on Tuesday, with a total size of $1.5bn split across 3 and 5 year terms. Pricing set at +57 and +78bps respectively.

U.S Inflation Print

  • The December inflation print in the U.S was released overnight, recording 7.00% year on year. The highest print in 40 years.
  • This value was expected by the market and prints between 7-8% are expected over the coming months.
  • It resonates with the Federal Reserves latest comments of the need to control inflation, by using the relevant tools, to continue extended growth and reach maximum employment.
  • The market shrugged off the news, with little movement in 10 year treasury (down two bps – now resting at 1.72%) and a slight increase in the 2 year yield to 0.91%, up one bp.
  • It is now highly likely that the Fed will raise rates come the FOMC meeting in March.

Global Growth to Stunt

  • The World Bank has predicted a pronounced slowdown of global growth in the next two years.
  • It is expected to be driven from a significant decrease of fiscal and monetary stimulus around the world and coupled with less pressure on global supply chains.
  • It is expected that global growth will decline from 5.00% percent in 2021, to 3.80% in 2022 and eventually to 2.3% in 2023.

Nicholas Allan

Associate - Money Markets