Daily Flows & Insights – Pressure Persists for Hurting Households, Fed Decision Tonight

Daily Flows

  • A1 banks have been leading the way this week with rates of 5.32% (6 months), 5.30% (2 years) and 5.35% (5 years) available for investors with surplus funds.
  • Unrated banks, including an ADI coming to market with their TD program, have snapped up funds at the 3 month mark with rates north of 5.00% available to ADI and non-ADI banks alike.
  • Fixed bonds, especially those in the A2 space, continue to represent attractive value for market participants on the back of jumps in swap rates over the last week; the new BOQ deal maturing in 2029 has been of particular interest lately.

Pressure Persists for Hurting Households, Fed Decision Tonight

  • Australian retail sales data yesterday continued a run of recent economic prints painting a picture of households feeling the pinch of the RBA’s 425 basis points in rate hikes.
  • Education, health, housing and food prices saw the biggest increases in March as retail sales fell 2.0%, grinding out an increase of just 0.8% on last year’s numbers despite large population growth and rising inflation in the interim.
  • The Fed meets overnight and is universally expected to keep rates on hold, but central bank watchers expect a more hawkish tone from Fed Chair Powell after quarterly wage growth of 1.2% in the March quarter represented a boost of 0.3% QoQ, with annualised growth of 4.8%.
  • Projections for the Fed’s first cut continue to creep further out, with just over one full cut priced in to the December meeting. Expect implied market pricing to respond with reckless abandon to any hawkishness in Powell’s press conference tonight.
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Curve Team
Josiah Binet