Daily Flows & Insights – Bank of International Settlements Hawkishness shrugged Off By Markets

Daily Flows

  • There is lots of activity coming to the EOYF. Bond trades have picked up, with Major Bank Senior Secured Bonds having two way flow.
  • Term Deposit and NCD markets continue to pace upwards, with banks having to out bid each other to attract funds.
  • 1 year term deposits continue to be offered at levels above 5.65%.
  • A foreign ‘A’ rated bank is showing +60 in order to attract new 3 month NCD funds.

Bank of International Settlements Hawkishness shrugged Off By Markets

  • Markets have shrugged off hawkish comments from the Bank of International settlements, leaving the monetary policy outlook very much in the air.
  • BIS General Manager Agustin Carstens said that “The time to obsessively pursue short term growth is past. Monetary policy must now restore price stability. Fiscal policy must consolidate.”
  • He went further “High inflation could persist,” then adding “In addition to the inflationary pressures already in the system, new ones could emerge.”
  • Despite the hawkish rhetoric, expectation for further tightening of monetary conditions have been softer to start the week.
  • Expectations for tightening in the US has eased off after the US Fed Chair’s testimony late last week.
  • Despite suggestions that two more rate hikes will come before the peak in the US cash rate for the cycle, the market no longer has any further tightening priced in.
  • Softer expectations have filtered through to pricing for the RBA with another hike no longer fully priced in for August with it now pushed back to September.
  • Those expectations for the RBA will surely shift after tomorrow’s monthly CPI release.
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Curve Team
Jack Pedersen