Daily Flows & Insights – Central Banks Face The Goldilocks Conundrum

Daily Flows

  • There has been high trading volume of the 3yr & 5yr CBA issuance in the secondary market.
  • TD activity was quiet yesterday. An ‘A’ rated ADI continues to suck up funds with an offering of 5.27% for 12 months.
  • The bid tone in the NCD market has subsided, with +50 for 3 months only being offered by foreign branch banks.

Central Banks Face The Goldilocks Conundrum

  • The FOMC minutes taken at the last Fed meeting revealed  that majority of participants agreed that there is significant upside risks to inflation, which could require further tightening.
  • There was a minority that saw downside risks to the economy and believed the current policy rate is restrictive enough.
  • As is the dilemma for most banks, they face the goldilocks conundrum.
  • What level of monetary policy will return price stability in a reasonable time without breaking the economy.
  • Equities sold off slightly and bond yields rose slightly higher.
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Curve Team
Jack Pedersen