Daily Flows & Insights – Weak Business Data and Cooling Inflation in Australia

Daily Flows

  • Over the past couple of days, longer swap rates have sold off, with the 5 year climbing for 4.12% to 4.20%.
  • Depending on the nature of the RBA interest rate announcement this afternoon, this sell off could retrace.
  • A couple of BBB names have come to market for TD funds. Market participants with funds to place have been rewarded with bespoke offerings across the curve.
  • NCD margins remain at +45 with activity quiet yesterday.

Weaker Business Data and Cooling Inflation

  • Corporate profits for Q2 2023 fell by 13.1%, the biggest decline since records began in 1994.
  • Westpac did note however, excluding the mining sector the fall was only 5.8%.
  • Inventories also fell unexpectedly by 1.9% in Q2 2023, missing the expected increase of 0.4%.
  • The Melbourne Institute Inflation Gauge showed an easing of prices, marking the 12th monthly increase.
  • The weaker economic data and cooling inflation will serve as good news for the RBA and could contribute to dovish rhetoric at this afternoons meeting.

Labour Demand Remains Persistent

  • Yesterday, ANZ-Indeed Job Ads MoM increased by 1.9%, jumping from last months growth of 0.7% MoM.
  • Keeping in mind the previous 5 months were negative or 0, this has been the strongest rise in job ads since June 2022.
  • On an annualised basis, job ads have decreased by 7.7% but are still 52% higher than pre-pandemic levels.
  • Labour demand seems to remain persistent, despite the July Labour data shows an increase in the unemployment rate.
  • The tight labour market continues to remain an area of concern for the RBA as it could contribute to wage increases and feed into price setting by firms.
  • However, with inflation on the right track it seems they are happy to monitor and react to the data accordingly at this stage.
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Curve Team
Jack Pedersen