Daily Flows

• Strong recent interest in semi-government bonds continued yesterday with investors still looking to snap up FRNs, with TCV, WATC and QTC remaining popular issuers.
• TD rates have continued to creep up in recent weeks in line with improved reference rates, with 5.19% still the stand-out rate at 6 months from an A1/A rated bank.
• NCD margins remain at the +45 level for domestic issuers, with some foreign branch banks at +50, representing strong relative value.

RBA Day Today with Markets Primed for a Pause

• Economists are unanimously tipping another interest rate pause when the RBA meets this afternoon, with rates expected to remain unchanged at a 12 year high of 4.35%.
• Recent economic data prints indicate the aggressive hiking cycle has worked to tackle demand, but with inflation still sitting above the RBA’s target range, softer recent CPI data is yet to build a strong enough case to begin cutting.
• We expect the RBA to retain a cautious tone in its Statement of Monetary Policy, but the door remains open for a softening of its hawkish commentary over the hiking cycle.
• Markets are pricing in a first full cut in July, with a second by November, in line with major bank forecasts for a first cut in the second half of 2024.