Daily Flows

• Reference rates continue to slowly climb, placing upwards pressure on TD spreads across the curve.
• 4.65% for 3 months, 5.00% for 6 months and 5.10% for 1 year TD’s have been consistently snapped up by market participants.
• +45 for 3 month remains the margin needed to attract funds in the NCD Market.
• Today, domestic wages data should be watched closely by Money Market participants as an unexpected print could influence BBSW and Swap Rates.

RBA Surprise and Budget Hit Confidence

• A delayed consumer sentiment survey showed that households remain under pressure from higher rates and increased cost of living.
• Those hoping that the budget would provide relief were also disappointed according to the survey.
• The headline sentiment index was down 7.9% to 79, hovering around recent lows marking it as the most prolonged downturn in sentiment since the 1990’s recession.
• Family finances and economic expectations were also hit while confidence in the employment market is starting to fade.
• From a monetary policy perspective, the RBA will be hoping that the pressure being put on consumers will translate into lower consumption, in turn reducing inflationary pressures.

Minutes Detailed Decisions Factors and Outlook

• The minutes to the RBA’s May meeting highlighted the debate between pausing again and hiking a further 25bp.
• It appears that the decision was a close one and in the end the RBA opted to go again, noting that “forecasts presented at the meeting were predicated on a technical assumption for the path of the cash rate that involved one further increase.”
• What the minutes didn’t touch on, which was later published in the quarterly SoMP, was that those same assumptions also showed that “The cash rate is assumed to peak at around 3¾ per cent before declining to around 3 per cent by mid-2025”.
• It was clear in the minutes that the RBA still sees the risks to the upside and as such maintained a tightening bias.
• Whether or not we see another hike is up for debate, but it appears that any move to reverse course and cut rates will be some time off.