Daily Flows & Insights – Sticky US Inflation But Markets Say Fed Has Done Enough

Daily Flows

  • +55 NCD margins from a domestic A3 issuer are still available today but will be pulling back slightly from Monday, so market participants looking at NCDs have a good opportunity to invest at these rates.
  • We have several unrated names open to funds today, with rates of 5.15% for 9 and 12 months, with A2 banks in the 5.10% area for 1 year deposits.
  • Standout TD rates in the A1 space – which are also the best we are seeing in the market – are 5.26% for 12 month deposits today.


Sticky US Inflation But Markets Say Fed Has Done Enough

  • Inflation remains sticky in the US, with overnight CPI data coming in stronger than expected for the December data print. Increases of 0.3% month-on-month and 3.4% annually exceeded consensus projections of 0.2% and 3.2% respectively.
  • A block trade placed after the CPI report is believed to be the biggest ever placed in the fed funds futures market, sparking a 10bp sell-off immediately following the data release. Despite this, the US 10 year ended the session 6bps lower on the day at 3.97%, suggesting markets were looking through the initial surprise.
  • Likewise, the S&P 500, having dropped 1.2% after the data release, ended the day almost flat at -0.07%.
  • Having started the year expecting seven Fed cuts by next January, and down briefly to 6, markets are now back to expecting a full seven cuts by early 2025. Inflation may be proving sticky but this data suggests when the Fed does begin cutting, it will do so with vigour.
  • Closer to home, this week’s softer YoY inflation numbers have pushed market expectations to more than two full rate cuts by December with a first cut now projected for June.



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Curve Team
Josiah Binet