November 4, 2022
Fixed Income Solutions
We aim to provide the best expertise, pricing, liquidity and execution in the fixed income sector.
Market Wrap
The week ended?November 4, 2022
Positive momentum in U.S. equity markets reversed course last week as risk-off sentiment took hold after hawkish commentary from Fed Chair Jerome Powell in his post-FOMC meeting speech, spooked markets, sending treasury yields higher and equities tumbling.?
The crux of Powell’s message was that he believes it is far too premature to think about pausing rate hikes; the Fed holds a bias towards over-tightening and expects rates to be higher and for longer than initially anticipated.
Equity investors had looked to be embracing a potential “Fed Pivot” over recent weeks. Although it was all but confirmed that the pace of future hikes is likely to slow, the surrounding commentary stuck at the front of mind.
This all came from the Federal Reserve raising the Fed Funds rate by 75bps at its November FOMC meeting. This was the fourth consecutive 75bps hike, which has seen the Feds Funds rate lift from a target band of 0.00/0.25% to 3.75-4.00% in just seven?months.?Markets are now pricing in a peak rate of 5.25% by March 2023.
The U.S. yield curve further inverted on this news, and now the 3m-10y has joined the 2-10y in inversion.
Markets outside of the U.S., including?locally, generally finished the week on a positive note. The ASX gained ground thanks to solid performances across the Energy and Material sectors, with widespread rumours that China was planning on dropping their COVID-Zero policy – China has since shut down these claims.
Australian government bond yields climbed, the 10-year finishing the week at 3.89%. In corporate bonds, spreads tightened, the Australian iTraxx moving another 10 points lower.
News and Data
Australia
While most of the nation entertained “Cup Day”, the RBA moved in line with market?expectations, hiking rates by 25bps, bringing the cash rate to 2.85%. Economic differences apart, in comparison to the Federal Reserve, the RBA is taking the more conservative approach. Governor Lowe acknowledged the risk of Monetary Policy lag and downward revisions on economic growth while still wary of inflation risks however the RBA’s focus is seemingly less narrow than the Federal Reserves - i.e. squash inflation at all costs.
United States
As mentioned above, the Federal Reserve raised the Feds Funds rate by 75bps, again this was in line with market expectations.
Jobs growth continued in October, as the Government reported 261,000 new jobs generated through the course of the month, well above forecasts of 191,000. While according to the Job Openings and Labor Turnover Survey (JOLTS), job openings rose to 10.7m, above expectations.
Highlighting these are lagging indicators, we expect this to shift dramatically over the coming months; growing reports of significant layoffs across technology companies have begun, with similar layoff rumours for large financial firms also following.
Global
The Bank of England (BOE) increased the bank rate by 75bps to 3.00%, meeting market expectations. The bank signalled that they don’t anticipate interest rates to go much higher but did warn of a grim economic outlook with a “tough road ahead”.?
领英推荐
The Week Ahead
Key Events
Weekly Bids and Offers
We have a variety of bonds being bid and offered, please get in touch with a BGC fixed income representative if you have any interest or would like to know more.
DISCLAIMER
FIXED INCOME SOLUTIONS?is a division of?BGC Securities (Australia) Pty Ltd?(ACN: 092 873 142), which is regulated by the Australian Securities & Investments Commission (ASIC) under Australian Financial Services Licence No. 399636
This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are?Wholesale Clients?or?Professional Investors?as described in Section 761(G)7 of the?Corporations Act 2001?(as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be classified as Retail Clients.
This document has been produced for information purposes only and is not to be construed as investment advice or a solicitation or an offer to purchase or sell investments or related financial instruments. The transaction or investments referred to in this document may not be suitable for all recipients. The information contained in this document does not purport to contain all of the information that may be required to evaluate the transaction described herein, and you are encouraged to read the transaction documents and should conduct your own independent analysis of any data referred to therein. You are urged to request any additional information you may consider necessary or desirable in making an informed investment decision.?You should make your own investment decisions based upon your own financial objectives and financial resources and, if in any doubt, should seek advice from an investment advisor. This document may not be reproduced for further publication without our prior written permission.
The information contained in this document may have been provided by or derived from third parties and may not have been verified by Fixed Income Solutions or its affiliates. Sources of the information contained in this document are believed to be reliable, but neither Fixed Income Solutions nor any of its affiliates make any guarantee, representation or warranty, express or implied, as to the accuracy, truthfulness or completeness of the information contained herein, and nothing contained in this document shall be relied upon as a promise, representation or warranty by Fixed Income Solutions or its affiliates in relation to or in connection with the transaction described in this document. Any representations and warranties contained in this document are made solely and directly by such third parties (and not Fixed Income Solutions or any of its affiliates). Fixed Income Solutions and its affiliates expressly disclaim any and all liability (including for direct, indirect or consequential losses) which may be based on information contained in this document, errors therein or omissions therefrom.
Fixed Income Solutions or its affiliates and their directors or employees may, as principal or as agent, make purchases, sales and offers to purchase or sell in the open market or otherwise and may have positions in or options on any financial instruments mentioned, and may have interests different or adverse to your interests.
To the extent permitted by applicable law, no liability whatsoever is accepted for any direct or consequential loss, damages, costs or prejudices whatsoever arising from the use of this document or its contents. Decisions to enter in to investments by Wholesale Clients or Professional Investors are made entirely at the risk of such persons after completion of a level of due diligence to be expected of Wholesale Clients or Professional Investors and in consideration of their personal financial objectives and financial resources.
Any views expressed herein are the personal views of the author and in no way reflect the views of the BGC Group.?Individuals should make investment decisions based on a comprehensive understanding of their own financial position and in consultation with their own financial advisors.?No liability whatsoever shall accrue to the author or the BGC Group as a result of individuals or entities making investment decisions based wholly or partly on this material.