Daily Flows

• With the RBA decision today, some market participants held off placing short end funds until post announcement.
• The NCD market continues to have a strong bid tone, with margins of +50 for 3 months common place.
• Term Deposit offerings continue to be offered at 5.80% for 1 year in the BBB space.

Domestic Housing Data

• Yesterday, Building Permits MoM for May came in significantly higher than expected at 20.6% (forecasted 3.6%).
• This rise can be in part due coming from a weak starting point of a -6.8% print last month and was also driven by a 150% increase in apartment developments for NSW.
• The June CoreLogic home value index rose by 1.2% in June after a gain of 1.4% in May.
• The building permits and steady rises in price gains continuing despite rising interest rates and persistent inflation reflect the prevailing data currently facing the RBA.

RBA Faces Goldilocks Decision

• Currently the market is pricing in 20% chance of a rate hike and 13 out of 27 economists are forecasting a hike.
• The prevailing data of a resilient housing market, a tight labour market, retail sales holding up and a persistent core inflation read can all be viewed as points that will lead the RBA to hike again.
• On a global level, central banks have continued to reflect hawkish sentiment which may also factor into todays decision.
• With the last two hikes taking the markets off guard the RBA may be inclined to pause to ensure a higher chance of the soft landing.
• Either way, it seems more hikes are expected, its more a question of timing and how quickly the RBA want to continue.