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.