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.

RBA Hikes Rates – How High Will They Go?

RBA Recap

  • An upside surprise from Q1 inflation along with more wage increase talk from its business liaison program forced the RBA’s hand at their May board meeting.
  • Along with hiking rates for the first time in over a decade, the RBA is now setting a course to normalise monetary policy over the medium term to combat growing inflation pressures
  • With the bulk of inflation pressures coming from the supply side, this tightening cycle will be fraught with danger as the RBA need to walk the fine line between taming inflation without tipping the economy over.
  • The big question is, how high rates will go?

Markets Recap

  • Term Deposit and NCD rates have surged. Reference rates are the largest driving force along with banks searching for tenor.
  • Credit spreads have placed further upward pressure on investment rates.

Investing Considerations

  • Due to the rapid increase in rates, investments made over the past couple of months might seem ‘underwater’.
  • Tenor is an important part of a portfolio and should not be discouraged in a volatile period.
  • Absolute returns should be recognised.

Economic Summary

  • The economy is still experiencing increased inflation worries. Business and consumer confidence are reflecting this.
  • The war in Ukraine, China covid lockdowns and recent flood events will continue to disrupt supply chains and will place further pressure on inflation prints.

Please click here to download the May Monthly.

The RBA, Rising Rates, War, Flooding and The Australian Economy

RBA Recap

  • The RBA left rates unchanged, watching and deliberating with uncertainty plaguing the forecast.
  • Supply chain disruptions continues to drive inflation upwards and the war in Ukraine will make this worse.

Markets Recap

  • Term Deposit and NCD rates are increasing. Investors are being rewarded for investments with longer tenor.
  • Reference rates and credit spreads have been the largest driving force.

Investing Considerations

  • The steepness of the yield curve means a much larger reward for longer investments.
  • Breakeven analysis should be performed before making a shorter investment, even with rates rising.

Economic Summary

  • The economy is still recovering strongly from Omicron, but is still suffering from significant headwinds.
  • The war in Ukraine and recent flood events will continue to disrupt supply chains and could see inflation spike quicker.

Please click here to download the March Monthly PDF

QE Ended

RBA Recap

  • The RBA ended their QE Program, in sync with other central banks.
  • Whilst inflation is at the forefront of The RBA’s policy, they are willing to be patient with the cash rate.

Markets Recap

  • Term Deposit and NCD rates are trending up. Bank appetite and increased reference rates are the main drivers.
  • The yield curve is steepening and offering reward for duration.

Investing Considerations

  • Increasing duration of investments will provide investors with the greatest return.
  • Take advantage of the slope of the curve.

Australian Economy

  • The economy is still recovering from Omicron, with business confidence down. Yet the broader outlook is positive.

Please click here to download the Monthly February 2022 PDF

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