Daily Flows & Insights – Markets Rally with Positive Central Bank Risk Sentiment

Daily Flows

  • 5-year Aussie swaps ended last week at 4.78%, peaked at 4.96%, and have now dropped to 4.73%.
  • Today, term deposit offerings of 5.70% for a 5 year tenor reflect relative value as the outright level remains the same but margins over reference rates have widened considerably.
  • NCD margins remain at +45, with a bid tone persisting in the market.

Markets Rally with Positive Central Bank Risk Sentiment

  • Equities in Europe and the U.S. rallied strongly overnight with both the BoE and the Fed keeping rates unchanged.
  • While Powell made it clear that monetary policy will remain restrictive, markets surged with confidence due to the notion that rates in the U.S. and Europe have peaked.
  • The U.S. 10-year yield rallied by 13 basis points, and the Dow Jones Industrial Average rose by 1.70%.
  • WTI oil has dropped to $80 as markets take the view that the risk of economic consequences spreading is less severe than headlines indicate.
  • This rally in bond markets follows a period of significant volatility when both U.S. and Australian 10-year yields were close to 5.00%.
  • If this does indeed mark the peak of U.S. rate hikes, it may lead to yield curves stabilising and less uncertainty in the market.
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Curve Team
Jack Pedersen