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.