Daily Flows

• Hawkish U.S. central bank rhetoric, coupled with a hotter-than-expected U.S. CPI print, has driven rates higher across the yield curve.
• This price movement has led to increased bidding for fixed bonds and a rise in demand for longer-duration (4–5 year) term deposits.
• The best rate we saw at the shorter end was 4.91% for 3 months, offered by an A-rated institution.

U.S. Inflation Confirms Powell’s Cautious Approach

• Overnight, U.S. inflation came in higher than market expectations, reinforcing the Fed’s cautious stance.
• While individual prints should always be considered in the broader trend, this release still moved markets, pushing the yield curve up 10 basis points since the start of the week.
• The Fed’s approach contrasts sharply with that of the RBA, where markets and economists are anticipating a cash rate cut next Tuesday.
• Although employment remains tight and potential global tariff disruptions could be inflationary, markets are betting that the RBA will take a more forward-looking stance, prioritising economic stability over short-term inflation risks by cutting rates.