Fund Flows

• We have seen strong early interest in today’s special from a domestic BBB+ equivalent bank, which is showing +50 for 3 months to fill a funding gap.
• Market participants continue to be rewarded at longer tenors with a foreign ADI (A1/A) offering 5.67% for a 5 year term deposit.
• Those looking for fixed rate exposure can be rewarded with yields of 5.87% in the domestic BBB+ space and 5.60% for domestic A-rated bank paper.

GDP

• U.S. GDP grew at an annualised 4.9% in Q3, the fastest rate in two years, beating estimates of 4.3%. Markets interpreted this print as a peak in growth and this, combined with expectations of a lower September consumer spending reading expected tonight, begins to set the stage for medium-term rate cuts with inflation cooling.
• Equity markets were in the red overnight with the NASDAQ down 1.8% and S&P 500 down 1.2%. Stock markets across Europe were down. Bond yields were 12bps lower in the US at 4.84% with the Aussie 10 year down 7bps to 4.80%.
• All eyes remain on RBA Governor Michele Bullock who told a Senate committee yesterday that the most recent CPI data would change the RBA’s inflation outlook, but that a November rate rise would depend on whether they consider it a “material” change.
• The RBA now expects inflation to move back into its target range of 2-3% by Q4 2025, pushing out the timeline in response to the latest data. Markets have cooled slightly on the prospect of a Melbourne Cup Day hike, pricing in a 44% likelihood of a jump to 4.35%, down from over 60% in the immediate aftermath of yesterday’s inflation print.