Daily Flows
- Yesterday’s flows were quiet, with most investors rolling funds into short-dated terms.
- Trading activity continues in A- rated lines, such as the BOQ Apr 2029 floating rate note.
- Investors seeking higher margins in NCDs have been directing funds to foreign branch banks, where 4.90% outright for 6 months remains achievable.
Softer U.S. Data Pushes Forward Fed Cut Expectations
- Last night, US ISM Services PMI dropped to 52.8 for January, down from 54 and below expectations of 54.3.
- The data signals a slowdown in the services sector, with new orders and business activity driving the decline.
- The latest JOLTs report also confirmed a weakening labour market, reinforcing that wage growth and labour-driven inflationary pressures are easing.
- Markets have repriced monetary policy expectations, now fully pricing in two rate cuts for 2025.
- This shift in outlook, combined with softer US data, is driving lower yields at the front end of the US curve, with potential spillover effects into the Australian market.