Daily Flows & Insights – Fed Sees Fewer Cuts This Year Despite Cooler Inflation

Daily Flows

  • We saw plenty of activity in major bank paper yesterday with investor preference for 3-5 year fixed lines.
  • An A2/BBB+ issuer is setting the pace in the NCD market this morning, offering +60 over 3 month BBSW.
  • ADIs continue to adopt a bid tone in the term deposit space, with multiple A2 banks above 5.30% for 12 months yesterday.

 

Fed Sees Fewer Cuts This Year Despite Cooler Inflation

  • US inflation cooled in May, with MoM flat at 0.0% and core inflation creeping up by 0.2% on expectations of an 0.3% rise.
  • Hours later, the Fed held rates steady in the 5.25-5.50% range for the 7th consecutive meeting.
  • Fed officials’ interest rate forecast now implies just one cut by the end of the year, two fewer cuts than the March estimate – which had 10 of 19 dots implying a minimum of three cuts this year.
  • The latest dot plots has eight projecting two cuts, seven with one, and four with no cuts – leaving zero still backing three cuts.
  • The US 5 and 10 year plunged 15bps in the immediate aftermath of the inflation data but regained some ground in later trading to finish the day down 10bps.
  • Domestically, Australian employment data is due out at 11:30 today with economists tipping a slight improvement in the unemployment rate from 4.1% to 4.0%.
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Curve Team
Josiah Binet