Daily Flows & Insights – Softer U.S. inflation Has Markets Optimistic, Risk Still Present For Central Banks 

Daily Flows

  • Markets have recalibrated off the back of last nights U.S. CPI data.
  • Bond yields have dropped, the U.S. dollar has weakened and equities rose.
  • Today, investors should expect lower outright TD and NCD offerings at the longer end of the curve as reference rates reprice.
  • Yesterday, flow were attracted to 1 year TDs with 5.75% up for grabs in the BBB space.
  • 3 month NCDs are still being picked up at +50 from domestic names.

Softer U.S. inflation Has Markets Optimistic, Risk Still Present For Central Banks

  • Philip Lowe spoke yesterday to discuss upcoming changes to the mechanics of the RBA in response to government commissioned review released this year.
  • Markets did take to what they interpreted as more dovish tones when comparing to post meeting sentiment.
  • This market sentiment was further fuelled by overnight U.S inflation data showing signs of slowing.
  • Last night, U.S. inflation rose by 0.2% MoM, inline with market forecasts.
  • For the year, this has the inflation rate at 3%, 0.2% less than forecasted.
  • The core reading which excludes volatile items such as food and energy fell to 4.8%, the lowest since October 2021.
  • This print is signals potential reprieve for the Feb and global central banks, however risk sentiment is still there as concerns over sticky services inflation remains.
  • This sentiment is reflected in the Bank of Canada’s decision to raise their cash rate to 5% and the accompanying hawkish rhetoric.
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Curve Team
Jack Pedersen