Daily Flows & Insights – RBA Shakeup

Daily Flows

  • Yesterday, term deposit flows were directed towards the 6 month and 1 year tenors.
  • Middle market investors took advantage of elevated BBB rates of 4.90% for 6 months and 4.95% for 1 year, an increase partly driven by a rise in reference rates.
  • In order to maximise yield and diversify credit exposure, most complimented BBB investments with the rolling of short funds into an ‘A+’ rated ADI offering 4.40% for 3 months.
  • Two way flows are beginning to return to the NCD market, however a bid tone is still apparent with +40 being offered for 3 month NCDs.
  • 1 year term deposits have cracked 5.00%. This level has been driven partly by market expectations post RBA minutes and may only be shown for a limited time.

RBA Shakeup

  • Following a challenging few years setting monetary policy, the review into how the RBA conducts itself will be released later today.
  • Ahead of the release, Federal Treasurer Jim Chalmers flagged a number of the key 51 recommendation from the review that he plans to support.
  • It is expected that the RBA’s Boards responsibilities will be split in two with one Board looking after setting rates and the other running the RBA.
  • The splitting into two Board’s is a similar approach as used by the Bank of England and Bank of Canada and will open up for more transparency and spread the responsibility for the decision making.

Inflation Eases

  • As we wait for our latest quarterly CPI read, NZ released theirs this morning which saw price pressures ease more than expected.
  • The headline index was up 1.2% against expectations of a 1.5% with the annual rate dropping 0.5% to 6.7%.
  • What was interesting to note is that tradable inflation slowed sharply from 1.4% to 0.7% while non-tradable remained sticky at 1.7% for the quarter
  • The is the type of outcome we should expect to see as consumption slows, drive by a fall in discretionary spending.
  • This is likely a precursor to what we will see with our CPI release when it comes out next Wednesday.
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Curve Team
Jack Pedersen