Daily Flows

• With 1 year swaps at 4.01%, significant term deposit flow was attracted to 1 year tenor with outright levels of 5.10% being offered in the BBB space.
• Currently, market participants are spoilt for choice, with a range of banks open to funds who are offering bespoke levels to attract.
• NCD margins remain high, with a margin of +45 for 3 months for new funds.

Debt Ceiling Debate Rages On

• With little in the way of data to feed markets, it was the debt ceiling debate that kept the things interesting on Friday night.
• Optimism of a deal faded with talks stalling as the negotiations continue to ebb and flow.
• A deal will eventually be done, what matters is the potential damage that could be caused the longer the negotiations drag out.
• Dovish comments from Fed Chair Powell couldn’t even get markets excited.
• He reiterated the data dependence on any further hikes from here and added that the recent financial instability means rates might not need to go as high as previously would have been the case.

The Week Ahead

• The data calendar will remain light here in Australia this week with the only highlight coming on Friday in the form of retail sales for April.
• Things will ramp up the following week when monthly data resumes along with the quarterly releases ahead of the Q2 national accounts.
• There will be a raft of data released in the US over the course of the week with the highlights of the Fed minutes and the latest PCE inflation data which is the Fed’s preferred measure.
• It is likely that the data will play second fiddle until we get past the debt ceiling debate.
• On central bank watch this week, the Reserve Bank of New Zealand will meet Wednesday where another 25 bp hike is fully priced which would take their overnight rate to 5.5%
• There is upside risk given there is still 2 ½ hikes currently prices in by August.