Daily Flows
- We continue to see flows into the 5-year tenor, with investors taking advantage of a 4.70% yield from an ‘A’ rated bank.
- With the RBA holding firm on its current restrictive policy, market participants are still enjoying a term premium on 3- to 6-month deposits, with a 19 basis point pickup.
- The 2- and 3-year terms remain the lowest part of the curve, with outright term deposits offering 4.30%.
3-Year Inflation Low Not Expected to Sway the RBA
- Australia’s Consumer Price Index (CPI) for August 2024 increased by 2.7%, down from 3.5% in July, marking the lowest inflation rate since August 2021. This brings inflation within the RBA’s target range of 2-3% for the first time in three years.
- The drop in inflation was largely driven by a record 17.9% fall in electricity prices, thanks to the Energy Bill Relief Fund, along with a 7.6% decrease in automotive fuel, the first decline in fuel prices in over a year.
- Underlying inflation, which excludes volatile items, rose by 3.0% in August, the lowest since December 2021. This points to a broader disinflation trend, extending beyond energy and fuel relief.
- The RBA remains cautious, expecting inflation to rise above its target in 2025 as energy subsidies phase out. Governor Bullock emphasised that underlying price pressures persist.
- Forecasts for Q3 2024 inflation remain softer than the RBA’s projections, indicating that disinflation could continue as price moderation spreads across more sectors.