- An ‘A’ rated bank attracted significant flow yesterday, offering 5.30% for a 1 year term deposit.
- As we approach mid-month, self-securitisation tops up has seen the demand for funds subside a little.
- In the fixed income securities space, flow has been directed to major bank 3-5 year offerings.
Aussie Dollar Trends Downwards
- Yesterday was a quiet day in terms of data. Today markets will be bracing for Q2 Wage price Index and Minutes for the August RBA meeting at 11:30AM.
- Currently the AUD/U.S is 0.6485$. Markets are seeing further downward pressure on the strength of the Aussie dollar through two factors: concern around the Chinese economy and foreign funds looking to lend their money in the U.S. or Euro markets.
- Currently our cash rate is 4.10% and may have reached a peak whereas the U.S. may be taking their Federal Funds rate beyond 5.5%.
- Hence speculative funds are more inclined to lend in foreign markets for better returns.
- China’s new bank loans fell by 89% in July even with the Chinese government cutting interest rates and pledging support to the faltering economy.
- Growing concerns over firms ability to repay debt has been fuelled by top property developers failing to pay bond coupons on the specified date.
- If significant downward pressure is placed on the Aussie Dollar, the RBA may need to take into consideration the gap growing between U.S. and Aussie Yield Curve when deciding future monetary policy.