Daily Flows
- Yesterday term deposit flows were directed to the shorter end of the curve, with market participants picking up yields upwards of 4.60% for 3 months.
- 5.10% continues to be offered for 1 year term deposits and continues to attract funding from Middle Market Investors.
- With demand for funds persisting, the NCD market level for 3 month continues to hold at a +45 level.
RBA’s Revised Neutral Cash Rate
- The local data releases for the week get under way today with the monthly consumer sentiment report due out.
- It will be interesting to see what impact the latest move from the RBA and the government’s latest budget have had on consumer confidence.
- This is important as where consumption goes, so does monetary policy.
- Also out today are the minutes from the RBA’s May board meeting
- The details will be sifted through for any clues to the outlook.
- However, the recent Freedom of Information request received by the RBA showed that their previous assumption for the neutral rate was much lower than where it now stands.
- It was suggested that the neutral rate for the cash rate, where it is neither restrictive of stimulatory, was almost 1% lower than the latest assumption.
- The latest assumption puts it roughly in line with where the cash rate currently is which could have ramifications for the outlook further down the track.