Daily Flows & Insights – Job Done For The RBA?

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.
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Curve Team
Jack Pedersen