Continued interest in BBB notes sparked by the GSB issue on Tuesday saw keen interest from investors chasing mutual bank paper in the 2-5 year space, with buyers able to secure client-to-client stock at very attractive margins.
Market participants took advantage of margins of +55 from foreign branch banks, with up to +65 available for 6 month NCDs.
The term deposit space remains a good opportunity to take advantage of specials as A2 names bid for longer-term deposits, with 18-24 months seeing interest in addition to 6 and 12 month deposits.
Hotter Inflation in Chilly Britain Triggers Sell-Offs
UK inflation came in hotter than expected in December at 0.4% MoM, up from November’s 0.2% monthly fall, with annual change of 5.1%. Both prints beat economists’ estimates and surprised the market, with sell-offs across the curve as 10 year Gilts jumped 19bps to 3.98%.
Across the Atlantic, US yields rose 5bps as bond traders continued to abandon aggressive bets of a March rate cut, with just a 50% chance of a cut priced in, down from 80% earlier in the week.
This was on the back of comments from Fed Governor Waller, who cautioned care and patience in beginning rate cuts with no immediate need to begin the process.
Despite plummeting consumer confidence in Westpac’s latest survey, Australian markets are now projecting a first rate cut in September with stronger likelihood of a November cut despite pricing in an August hike just two days ago.