20 October, 2023

Daily Flows

• Market participants with minimal fixed interest exposure are considering introducing longer-dated fixed income securities as 5 year yields climb.
• A fixed Westpac Sept28 security attracted flow a yield to maturity exceeding 5.30% and a BOQ Jan27 Senior Unsecured security was also picked up with a YTM above 5.60%
• With 1-year swaps at 4.40%, term deposits are trading with a credit spread of +90 basis points.

Jerome Powell Speech

• Yesterday, Jerome Powell addressed the recent increases in U.S. bond yields. He identified three key factors that rule out expectations of higher inflation and short-term policy adjustments.
• U.S. bond yields have reached their highest level in 16 years, causing concern in financial markets.
• Jerome Powell, the Chairman of the Reserve Bank, explained that the increase in yields is not due to expectations of higher inflation or short-term policy changes.
• Rather, Powell notes that markets are recognising the economy’s resilience to high-interest rates, leading them to revise their long-term economic outlook, which may necessitate higher rates.