Flight to Quality
- Risk-off sentiment drove a flight to quality overnight, with Treasuries rallying as the Nasdaq fell around 5% into correction territory and the S&P 500 dropped 3.5%.
- The front end led the move, with the 2yr yield falling 11bps to 4.46%, its lowest since mid-September and some 47bps off its late September cycle high, while the 10yr fell 5bps to 4.83%, also ~50bps below its 5.30% cycle high.
- Australia’s trade surplus widened to A$2.86bn in September from A$495mn, comfortably above the A$1.0bn consensus, as exports rose 2.3% and imports fell 3.3%. The widening was helped by stronger LNG exports and weaker gold imports.
- Deputy Governor Hauser also spoke yesterday, focussing on the risk of the RBA losing trust with inflation high for too long, having remained above the target band for more than 5 years. He said inflation remained too high across virtually all measures and that household and business inflation expectations were drifting higher, despite financial market measures being broadly stable.
