Daily Commentary BY THE CURVE TEAM –

Daily Insights – U.S Economy Shifting Gears

Thursday, 25th November 2021

U.S Economy Shifting Gears

  • Strong data prints out of the U.S show more strength and heat within the economy.
  • Consumer spending was up 1.3%, whilst personal income was only up 0.50%. As consumers presumably dip into their savings, supply chain bottlenecks could continue to add inflationary pressure.
  • Jobless claims were down to 40 year lows, at a level of 199,000.
  • PCE deflator levels rose to 5% from 4.4%.
  • GDP rose, but less than expected to a level of 2.1% from 2.0%.

RBNZ Hikes 25bp

  • The monetary supply has been tightened from 0.50% to 0.75%.
  • In response, the Kiwi Dollar fell 1.30%.
  • The 10 Year Bond rallied 10 basis points from 2.60% to 2.50% – showing signs of a bear flattener. This rally has not held, with the yield pushing back to 2.56%.

Follow The Money

An age old line that Hollywood loves to use. At Curve, we are blessed to see the flow of money – which is more telling than you think. Here’s what our clients have been doing:

  • Recently we have seen moderate flows into longer dated NTTC bonds and major bank bonds, as they present solid return to investors looking for yield.
  • In the short end, we have seen large flows into BBB-rated banks, which continue to offer 1.00% for a 12-month term deposit.
  • More ADIs search for funding, offering off-rate specials.

Nicholas Allan

Associate - Money Markets