Daily Flows
- It’s been a tumultuous week for reference rates, with term deposits swinging between highs of 4.85% for 6 months and lows of 4.60%, reflecting the broader volatility.
- Add in increased funding demand from banks, and it’s created ample opportunity for those placing out funds.
- Domestic credit spreads remain elevated, with Newcap 2030s still trading in the mid +145s.
Softer Inflation Data Overshadowed by Market Volatility
- What is usually a major market mover, U.S. CPI was largely overshadowed by volatility surrounding Trump’s tariff announcements.
- U.S. CPI fell 0.1% m/m, with annual inflation easing to 2.4% and core inflation to 2.8%, both below expectations and supporting further FOMC rate cut pricing.
- Despite the soft print, Fed officials were quick to push back, highlighting the importance of anchoring inflation expectations before easing policy too soon.
- Equity markets remain volatile, with the S&P 500 declining, likely on renewed fears around the escalating US–China trade war.
- Front-end U.S. Treasuries rallied on the soft inflation print, while longer-end yields continued to drift higher, leading to curve steepening.
- The RBA outlook is tracking global sentiment, with cash rate futures now pricing in five cuts by year-end, reinforcing the local market’s bullish bias on rates.
