Daily Flows

• The Aussie yield Curve is inverted at the shorter end (2Y vs 1Y), flat comparing mid-term vs short-term (5Y-2Y) and normal convexity in the long-term vs short-term (10Y-2Y).
• It is interesting to note that increases in yields at the longer end of the yield curve has less of a tightening affect on financial conditions in Australia compared to the U.S. as more of our funding is from the short end of the curve.
• NCD placements continue to be pushed out to 1 year terms as market participants chase yield.
• With only a few names chasing funds, any standout rates have been snapped up quickly by investors.

Markets Spooked By RBA Minutes

• Markets jumped off the back of RBA minutes yesterday.
• It was deemed more hawkish compared to the previous month with the board placing emphasis on their willingness to act if inflation does not come down quick enough.
• An extremely high Q3 CPI reading and a strong labour market may be needed to see the RBA hike in November.
• Geopolitical tensions are a new factor that have added uncertainty in the markets since the RBA meeting which will be further fuelled by a ‘live’ November meeting.
• A sell off has gained momentum in interest rate markets as those holding positions factor in a possible November hike.
• 1 year Swaps has climbed to 4.41% from 4.28% and 5 year has reached 4.66% from 4.45%.