Daily Flows

• Yesterday’s softer than expected inflation data saw a sell off in interest rate markets.
• Markets took into consideration how this data would impact future monetary policy and yields dropped 10 basis points in 1-5 year Aussie Swaps.
• Market participants that placed before the print enjoyed relative value, levels locked in of 5.65% for 1 year may not be offered today.
• NCD margins remain at +45 for 3 months, expect outright levels to be lower off the back of inflation data.

Job Done For The RBA?

• The QoQ inflation rate printed at 0.8%, 0.2% below expectations for an annual rate of 6%.
• Trimmed Mean inflation rose by 0.9% QoQ, easing from previous period print of 1.2% and undershooting market expectations of 1.1%.
• Looking into the print the slowdown was driven by easing of price pressures in goods such as food, furniture, appliances and clothes.
• A significant contribution to rises were rents, reflecting the tight rental market conditions, holiday travel & financial services.
• Services inflation remains sticky, it rose by 6.3%, up from 6.1% in the March quarter.
• Cash rates futures now only prices in 8 basis points of hikes come August.
• This print has seen markets scale back the chance of a hike as inflation has come in below the RBA’s forecasted levels.
• Private banking data continues to show a slow down in consumer spending and signs of growth slowing in recent business surveys support the call for a pause.
• The still tight labour market, persistent strong retail sales prints and the RBA looking to avoid price setting behaviour from markets are points that support a hike.