Daily Flows

• Last Friday, there was a significant flow into the term deposit market at the shorter end of the curve.
• BBB-rated names were able to attract funds with rates close to 5% for 5 months.
• The prevailing rate in the NCD space remains at +40 for 3 months, with sporadically higher levels as banks seek to fill funding gaps.

Middle-Eastern Conflict

• Over the weekend, conflict erupted in the Middle East with Hamas launching land, sea, and air assaults on Israel.
• The death toll is reported to have reached over 11,000 people, including women and children.
• The Israeli government has formally declared war and is expected to escalate significant military actions in retaliation.
• This tragedy is expected to create significant uncertainty in the markets and may prompt investors to redirect flow towards safe haven assets.
• The price of oil will also experience volatility as markets consider the possibility that the conflict could expand, effecting areas such as Saudi Arabia.

U.S. Non-Farm Payrolls

• In September, U.S. non-farm payrolls increased by 336K, surpassing market expectations and indicating that the labor market remains strong.
• The unemployment rate remained at 3.8%, the participation rate stayed at 62.8%, and average hourly earnings rose by 0.2%.
• This report marks the strongest job gain in eight months, exceeding the 70K-100K monthly requirement to support a growing working-age population. It highlights the resilience of the labor market amid the Fed’s tightening measures.

The Week Ahead

• This week, domestic consumer and business confidence data will be released on Tuesday.
• The key event of the week will be the U.S. inflation data scheduled for Wednesday night.
• Markets are at a pivotal point, seeking certainty regarding the short-term outlook for monetary policy.
• Currently, futures markets are pricing in an 18% chance of a Fed rate hike in November.
• The RBA faces a similar situation and is looking for clarity through the Q3 inflation report on October 25th to determine whether further tightening is necessary.