Monthly Insights BY THE CURVE TEAM –

With over 100 years of collective financial markets experience behind us, we have created Curve’s monthly insights, highlighting important global economic data and providing in-depth analysis to help you better understand the current economic climate.

Our most recent monthly insight papers are available for download with our compliments.

ADI Funding Gap Re-emerges

RBA Recap

  • The RBA kept their policy settings unchanged.
  • In February they will decide whether to taper or end QE.

Markets Recap

  • There were numerous investing opportunities in TDs and NCDs as ADIs sought funds ahead of Christmas.
  • The yield curve is flattening as rate hikes begin to be priced in at the shorter end and the subsequent drag on economic activity is priced in for longer tenors.

Investing Considerations

  • Although ADIs remain very liquid, the past month gave a glimpse of the investing environment when there is a negative funding gap.
  • As ADI liquidity positions normalise to pre covid conditions, investors will have more bargaining power.

Economic Summary

  • The economy is poised to recover strongly in the new year as covid restrictions are eased.

Please click here to download the Monthly December 2021 PDF

Yields Up Again

RBA Recap

  • The RBA ended the yield curve target on the April 2024 government bond following a market sell off.
  • Despite upgraded economic forecasts, including core inflation being in the 2-3% target range for the next two years, the RBA maintains that a cash rate increase is unlikely until late 2023 or 2024.

Markets Recap

  • Like last month, yields again rose sharply with New Zealand CPI, BOQ’s primary bond issue and Australia’s CPI driving market rates higher.
  • Working against markets were central banks, who remain dovish despite strong economic data.

Investing Considerations

  • Higher yields have arrived, as markets price in cash rate hikes as soon as mid next year.
  • Investors should consider market expectations, reference rates and the different yields across products before investing.

Economic Summary

  • Backward looking data show the impact of lockdowns, but forward indicators such as the business survey show a recovery is underway.
  • Employment and wages remain pivotal to monetary policy.

Please click here to download the monthly insights PDF Monthly November 2021

Higher Yields Appealing

RBA Recap

  • Following the RBA’s call to monitor lending standards, APRA implemented a key change regarding loan serviceability buffers.
  • The Minutes for September highlighted the differing factors driving the RBA’s decision on QE as opposed to the cash rate.

Markets Recap

  • There was a considerable pick-up in yields across a range of assets as markets grappled with persistent inflation and imminent central bank tightening.
  • It led to bonds trading at discounts and higher rates for longer tenors.

Investing Considerations

  • Bonds trading at a discount pose an opportunity for investors, but also a dilemma.
  • Longer tenors look increasingly attractive.

Economic Summary

  • With lockdowns in NSW and Victoria, the economy remains at two different speeds

Please click here to download the monthly insights PDF Monthly October 2021

RBA, APRA and Regulatory Impacts

RBA Recap

  • QE was extended to February at the rate of $4 billion of purchases a week
  • The August meeting minutes acknowledged the limited benefit of further monetary policy easing during lockdowns. This signals the RBA will likely maintain or reduce further QE purchases rather than increasing them.

Markets Recap

  • APRA ended the use of the CLF by the end of 2022, which will have implications for bond yields.
  • There were a range of primary bond issues over the month, including by a major bank, regional bank and semi government entity.

Investing Considerations

  • The CLF changes will put downward pressure on government bond yields over 2022 even as QE is tapered and should increase yields on non-government bonds.
  • Dollar Cost Averaging, and Averaging In are strategies to consider in a rising interest rate environment.

Australian Economy

  • However the impact of lockdowns is showing up in more recent data points with business and consumer confidence down along with retail sales.
  • Data over the last month continued to paint the picture of an economy doing well ahead of lockdowns with GDP coming in ahead of expectations and employment holding up well.

Please click here to download the monthly insights PDF Monthly September 2021

Updated RBA Forecasts and Barbell Investing

  • The RBA will proceed with tapering QE, which had implications for cash rate futures. 
  • The quarterly Statement on Monetary Policy contained updated economic forecasts. 
  • Barbell investing is a relevant consideration given the current market.
  • Lockdowns weigh on the economy.

Please click here to download the monthly insights PDFMonthly August 2021

Employment Outcomes Key to Rate Hike Timing

  • Governor Lowe had a busy week following the decision on yield curve control (YCC) and quantitative easing (QE), articulating the reasons behind their decision and delivering a speech on the employment outlook.
  • He made it abundantly clear that employment outcomes hold the key to the outlook for monetary policy.
  • How quickly Australia gets covid under control and what that means for international border policy will prove pivotal to employment outcomes.
  • While the 2024 timeline for rate hikes is still the central scenario it is not set in stone according to the Governor.

Please click here to download the monthly insights PDFMonthly July 2021