Daily Flows & Insights – U.S. and Australian Monetary Policy Path Begins to Diverge

Daily Flows

  • The yield curve retraced slightly at the middle/longer end due to a less-than-hawkish announcement from the Reserve Bank of Australia (RBA).
  • Despite this, bespoke levels of 5.35% for 1 year term deposits was sourced by Curve.
  • Bendigo’s 3-year price was set at 3mBBSW+100, and the bid attracted healthy volume.
  • Inflows to the NCD market were significant, but a bid tone remains across the system.

U.S. and Australian v Policy Path Begins to Diverge

  • The challenges faced by the U.S. Federal Reserve and the Reserve Bank of Australia are beginning to diverge due to different factors.
  • Both economies still have persistent demand. In the U.S., discretionary spending on goods remains high.
  • In Australia, inflation woes are driven by services, as discretionary spending on goods has cooled.
  • Market expectations differ: Australia is not pricing in a rate cut this year, while the Fed has a 75% chance of a cut priced in by September.
  • The COVID-19 pandemic led to synchronised economic challenges globally, but as the story unfolds, the dissonance between the monetary policy outlook and yield curve may begin to increase.
Share this entry
Curve Team
Jack Pedersen