Daily Flows & Insights – U.S. & Australian Interest Rate Outlook 

Daily Flows

  • 5.11% has been the level required to attract funds for 1-year term deposits. In the TD space, market participants have been favouring green-friendly counterparties when faced with the same credit rating.
  • NCD margins have recently settled. That being said, lots of banks seem to have micro dynamics driving specific funding requirements.
  • In the fixed income space, market participants have been quick to take advantage of bespoke opportunities on Senior Unsecured offerings in thinly traded lines.

U.S. & Australian Interest Rate Outlook

  • With the FOMC keen to keep pricing-setting behaviour at bay, their recent hawkish tone saw parts of the curve elevated with the 10-year Treasury rate at 4.35%.
  • Uncertainty loomed over whether this would further blow out, but it appears money managers have piled funds in at this level, resulting in a retracement of 15 basis points so far this week.
  • This rally may have been fuelled by the Fed’s dot plot, which signaled 0.75% worth of cuts in 2024.
  • Currently, markets have priced in over an 80% chance of rate cuts starting in June.
  • The RBA is maintaining a fairly neutral stance despite a stronger-than-expected labour market.
  • Compared to the U.S., markets are expecting a more gradual change, with an 80% chance of a cut by September.
  • Markets will look ahead to monthly CPI for further clarity; however, this print should always be considered as an indicator compared to quarterly data.
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Curve Team
Jack Pedersen