- Off the back of stronger than expected domestic labour data, the yield curve sold-off, pushing rates from 6 months to 5 years higher.
- This did not impact ADI offerings in the afternoon, with levels of 5.75% for 1 year and 5.65% for 6 months still enough to attract flow.
- Yesterday, market participants that had space for BBB- exposure were able to lock in NCD margins of +50 for 3 months from a domestic bank.
Labour Market Remains Resilient
- Domestic labour data printed yesterday, with an increase in full time employment driving a stronger than expected print.
- Employment increased by 32.6K, unemployment remained at 3.5% and the participation rate came in at 66.8%, slightly lower than forecasted 66.9%.
- The labour market continues to show strength, averaging +40K increase in employment over the last 3 months.
- Although labour data tends to be a lagging economic indicator, markets responded to persistent tightness in the labour market with a sell off in swap rates.
- Looking forward, this print is consistent with economists forecasts of the labour market reaching 4% unemployment by the end of the year.
- The RBA have voiced rising wages and low productivity as a concern in the fight against inflation. This print may add further concern and increase the chances of future rate hikes.