Daily Commentary BY THE CURVE TEAM –

Daily Insights – Retail Sales, Treasury Yields and OMO

29th of September, 2021

Retail Sales Deteriorates

  • Were down 1.7% for August.
  • They remain 5.4% higher than pre covid (February 2020) and 0.7% lower than last year.
  • Sales dipped in states experiencing lockdown over August, including NSW, Victoria, QLD, ACT.
  • Retail sales have been very volatile since covid, which is a contrast to pre-covid where sales tended to be very stable.

Treasury Yields Continue to Climb

  • The US 10 year reached 1.54%, the highest since June.
  • This will likely flow to Australian rates.

OMOs Reduced Role

  • We have in previous weeks noted that open market operations (OMOs) are now weekly.
  • These were once the cornerstone of how the RBA hit the cash rate target and were conducted daily.
  • A Banking Day article highlights that total outstanding OMOs doubled in the space of a month to around $100 billion in April 2020. This was to ensure the financial system remained stable as covid fears spooked markets.
  • Since then, with swathes of liquidity in the form of the TFF and bond purchases, OMOs have fallen to around $6 billion outstanding, as the balance sheet has grown from $170 billion to $590 billion.
  • The full article is: https://www.bankingday.com/public/20b8ef4b-d8fb-4bb6-abcf-9cc86e43d364

Josh Stewart

Associate - Money Markets