Daily Flows
- The Heritage & People’s Choice 3 year MTN priced at +160 yesterday, with a $400m deal size from an order book of $600m. This was the same margin as the Great Southern Bank deal from a fortnight ago which is now trading around the +150 mark in the secondary market.
- We saw several A3/BBB- names looking for funds yesterday, with 5.15% available for 12 month deposits, with unrated ADIs also on the lookout.
- Domestic A2/BBB names willing to pay +45 for 3 month NCDs have been quickly filled when they appear, with good opportunities available for investors who can quickly take advantage of these attractive rates when they appear.
Summer Inflation Cools as Markets Heat Up Ahead of RBA Meeting Next Week
- Australian CPI cooled in Q4 as both year-on-year and QoQ inflation printed below expectations, signalling a slowdown on the back of the most recent RBA hike in November.
- Quarterly headline inflation halved from Q3 and the markets’ preferred measure, the trimmed mean, came in at 0.8% for the December quarter, down from 1.2% in September.
- Australian yields plummeted across the curve with 3 years down 10bps and 10 years down 12bps to 4.01%. Money markets responded to the inflation data by pricing in a full additional cut, expecting three cuts by December with a first now expected three months earlier in June.
- RBA forecasts released next week will include yesterday’s inflation data and likely revise inflation expectations downwards. The central bank’s most recent forecast showed inflation north of 3% until the end of 2025.
- Overnight, the Fed held interest rates in the 5.25-5.50% band for the fourth consecutive meeting but does not expect to cut rates at the next meeting in March. The FOMC indicated it will only begin cutting its target range once it is more confident that inflation is trending towards a sustainable 2%.