Daily Flows

• With the yield curve inverting from 6 months – 1 year, A limited offering of 4.90% for 12 months in the BBB space continues to attract flow.
• Coming into a new month, expect to see an up tick in activity with ADIs keen to get ahead on monthly funding requirements.
• NCD margins continue to remain elevated at +40 for 3 month NCDs with two way flows slightly favouring the bid side.

Big Week for Monetary Policy

• With the start of a new month there is a big week ahead for markets, with the FED, European Central bank and RBA having meetings on their monetary policy.
• In the US, the FED has a tough job picking the best direction for monetary policy. Growth in GDP starting to decline, however personal consumption expenditure (PCE), which is a preferred measure for inflation by the body, is still growing and the labour market is remaining tight.
• The expectation ahead of the US and European meetings is a further hike of 0.25%, however with mixed data reports this is not a certainty.
• In Australia, the market has strongly priced in a pause ahead of the RBA decision tomorrow for a pause, and a 40% chance of a hike in August.
• For investors and banks the chances are that we have seen peak rates offered, with the yield curve flattening over the past month and beginning to steepen.
• This will give both sides of the money market more certainty when it comes to locking in longer term deposits.