Daily Flows
- We expect Wednesday’s bump in yields to flow through to term deposit rates over the next few days and have already seen some banks adjust their rates accordingly this morning.
- With oversubscribed primary deals a regular feature of 2024 so far, investors have continued to top-up allocations in the secondary market with fixed yields very attractive following the inflation data.
- Tuesday’s 7 year TCV primary issuance priced at +42 and sent semi-FRN margins skyrocketing, with stock in shorter TCV lines proving attractive for market participants.
Sticky Services & Rising Rates Postpone Rate Cut Expectations
- Australia’s Q1 inflation rate slowed by less than expected in data released on Wednesday.
- Annualised inflation of 4.0% (trimmed mean) beat estimates by 0.2%, with a quarterly reading of 1.0% on expectations of 0.8% responsible for the upside surprise.
- Services inflation was the main culprit for the hotter-than-expected reading with education and health prices rising at 5.9% and 2.8% respectively on a quarterly basis.
- Interest rate markets reacted immediately, with the RBA’s first cut now priced in for December.
- Aussie 10 year yields spiked 10 basis points on the release and are now almost 25bps higher than pre-print levels. The policy-sensitive 3 year rate finished Wednesday 17bps higher at 4.03% and is trading this morning at 4.15%.
