Daily Flows

• With the rates outlook and shorter term TD rates on the decline, investors have been keen to lock in longer tenors to secure a higher margin for a longer period of time.
• We are still seeing investors taking advantage of the ING and Judo rates holding at last year’s levels.
• Overall, its still a quiet start to the year, but looking to pick up strong again next week as more return from holidays.

Fed Minutes

• Overnight saw the release of the Fed minutes from their pre-holidays meeting, and it threatened to upset the current exuberance for rate cuts in 2024.
• While there was some acknowledgement that the Fed is done hiking, the general consensus amongst Fed members was that rates should stay higher for longer.
• That mantra is at odds with current market expectations for the Fed Funds rate for the year ahead.
• At the start of the week, the market had seven 25bp cuts priced in up to the January 2025 meeting.
• After easing back yesterday, expectations softened a touch further post the minutes with now only 6 ½ cuts priced in, still a far cry from the ‘higher for longer’ consensus amongst Fed members.
• The easing expectations of Fed cuts has also filtered through to expectation for the RBA with closer to two cuts now expected this year rather than the almost three that was priced in earlier in the week.