Daily Flows
- Regional bank paper traded yesterday, with investors favouring GSB FRN 11/2027s, which offered attractive margins. This was alongside the recent CBA issuance, which has tightened since launch in line with demand.
- Short-end rates continue to be offered below 5.00%, except for State Bank of India, which is introducing 5.20% for term deposits.
- NCD margins have remained relatively stable, reflecting steady supply and demand dynamics across the banking sector.
Michelle Bullock Delivers an RBA Cut with Grace
- Governor Bullock delivered a rate cut yesterday, clearly and confidently reinforcing that the RBA’s primary focus remains on inflation control, rather than providing immediate relief.
- A key term from Bullock was a “sustainable” inflation path—she noted confidence in inflation’s progress but stressed that it is not yet sustainably declining.
- She pushed back against market expectations, alluding that pricing for future cuts is too aggressive, delivering an overall hawkish message.
- Key upside risks to inflation include strong consumer demand, weak productivity, global policy uncertainty, and stagnating wage cost declines, all of which could slow disinflation.
- The labour market remains a key uncertainty, with hiring picking up in recent months, particularly in the services sector. The RBA flagged that this may signal stronger-than-expected economic momentum, potentially delaying further rate cuts.
- For the RBA to ease further, the labour market needs to loosen, and population/immigration growth must slow to moderate aggregate GDP. The RBA remains data-dependent and prepared to adjust as needed.