Daily Commentary BY THE CURVE TEAM –

Daily Insights – Payroll Dip

10th of September, 2021

CLF Gone

  • By the end of 2022, Committed Liquidity Facility (CLF) balances will be 0.
  • The CLF is for ADIs to include assets such as senior unsecured ADI bonds, as a substitute for government and semi government bonds to access liquidity from the RBA.
  • The move will put downward pressure on government and semi-government bond yields as the RBA taper QE over 2022 (as expected).
  • It may also present opportunities in non-government and semi-government bonds. ADIs may offload bonds such as senior unsecured ADI bonds in the secondary market, and there may be less demand for primary issues. Both could result in higher yields in assets such as senior unsecured bonds and NCDs.
  • ADIs may also come to market and raise funds to purchase semi-government and government bonds.


  • For the two weeks to 14 August payrolls were down 0.7%.
  • For the month to the 14th they are down 2.4%.
  • NSW was down 1.2% for the fortnight and 5% for the month.

Asset-Backed Security (ABS) Trend

  • A variety of ABS issuers have emerged over the past year.
  • The most recent is Prospa, which uses small business loans and credit.
  • In a low yield environment, ABS’s are a way to increase yield while maintaining credit ratings.

Euro CB

  • Forecasted inflation in 2023 is 1.5%, which would indicate interest rates will remain unchanged until at least 2024.
  • PEPP, a pandemic bond buying programme, still exists.
  • This is similar to the US’s initiative when the pandemic began, which expanded its bond purchases down the risk curve. In the case of the ECB, PEPP includes the purchases of very short-term corporate paper. The US includes mortgage-backed securities as well.
  • Unwinding PEPP without spooking markets will be a priority for the ECB, in a similar way that the Fed is weary of a taper tantrum.

Josh Stewart

Associate - Money Markets