- Today the domestic monthly CPI indicator is released. With school holidays and a long weekend in most states coming up, an unexpected result could see dramatic movement in interest rate markets.
- Yesterday, we continue to see flow directed to longer term products. Many market participants are barrelling their cash portfolios, ensuring they are maximising gains from any remaining steepness in the curve whilst maintaining short term liquidity.
- Volatility in longer dated securities has seen the spread between term deposits and floating/fixed securities reduce. Today, participants could pick up a fixed income security with the added level of liquidity for minimal extra cost.
Jittery Markets Continue
- U.S. equities fell overnight and bond yields remain elevated with wavering consumer sentiment data and weaker than expected new home sales data.
- The number of home sales decreased by -8.7% MoM (expected -1.7%), with the rise in interest taking its toll on new home demand.
- The Conference Board’s consumer confidence index fell to 103 in September, below expectations of 105.5.
- The expectations fell to 73.7 for September. Historically a level lower than 80 indicates a looming recession.
- To add to the unsettled markets sentiment, far-right Republican are attempting to block passing a budget which could threaten a government shutdown.
- This added uncertainty could see Moody’s downgrade U.S. sovereign debt.
- Markets seem to be on edge, with elevated oil prices and the higher for longer narrative creating volatility on the short-term and long-term inflation outlook.