NAB Morning Call

Tuesday 23rd March 2021There were big rises in US shares overnight, with the NASDAQ rising 1.7% in this session, helped by a moderate fall in Treasury yields. NAB’s Tapas Strickland says news of a higher than expected infrastructure spending plan also helped boost equities. Reports suggest as much as $3 trillion will be spent, a mere $1 trillion more than had been anticipated. Trials of the Astra...

Monday 22nd March 2021The Fed will push on with ending its lower capital requirements held against Treasurys, sticking with a schedule that will see the so-called supplementary-leverage ratio (SLR) ending on 31st March. Although not unexpected, NAB’S Rodrigo Catril says it risks weakening the appetite for bonds at a time when there is a much higher issuance doing down the pipeline. He explains why...

Friday 19th March 2021There was more reaction to the FOMC meeting today, with bond yields rising sharply. Oil has also risen a lot as tensions mount between the US and Russia. Biden referring to Putin as a “killer” doesn’t seem to have gone down too well, and now with the threat of sanctions from the US there are fears Russia will up oil production in response to impact the US shale oil industry....

Thursday March 18th 2021The Fed has upped its growth expectations for the US economy, driven by the fiscal support and the vaccine rollout. But Fed Chair Powell says they are still expecting to keep interest rates low through to 2023, and they are not even talking about starting to talk of tapering of their QE activity anytime soon. He also said inflation was expected to pick up in the shorter ter...

Wednesday 17th March 2021There wasn’t much movement in shares, bond yields or currencies overnight, despite weaker retail numbers out of the US. It’s a different story for Australia with strong jobs data yesterday ahead of the official ABS Labour market data later in the week. NAB’s David de Garis says the RBA has suggested that many big companies have already made their adjustments on employment...

Tuesday 16th March 2021The fear of blood clots from injections means use of the Astra Zeneca vaccine has been suspended in an increasing number of European countries, slowing down the rollout, whilst the UK pushes ahead, reaching almost 40 percent of the population so far. This issue of lagging behind is not just impacting the economy, but is also playing into the strength of the Euro, says NAB’s...

Monday 15th March 2021Bonds yields rose sharply again on Friday, with 10 year Treasuries reaching their highest level since February last year. NAB’s Tapas Strickland says the inflation break-even component actually fell slightly, as the Michigan Consumer Sentiment survey showed inflation expectations had fallen slightly. Meanwhile the cyclical rotation theme continues as the vaccination rollout a...

Friday 12th March 2021Asset markets continue to be drawn by bond markets, says NAB’s David de Garis, on today’s podcast. With stimulus coming down the line, and jobs data showing further signs of recovery, you might have expected increased inflation concerns, but yesterday’s CPI figures seem to have calmed those concerns for now. But the ECB is still kicking into action, promising a faster bond bu...

Thursday 11th March 2021The US 10 years notes auction this morning was a little softer than anticipated, but saw yields higher than last time. But NAB’s Gavin Friend says the story of the day was really the softer US inflation numbers, which saw yields pull back and helped stocks rise, with more rotation away from tech stocks. Meanwhile Philip Lowe from the RBA has been pushing back on market pric...

Wednesday 10th March 2021Shares have reverted to a focus on tech in the US with a sharp rise in tech stocks. In fact, almost everything is a reversal on yesterday, with the US dollar weakening, the Aussie dollar strengthening, and bond yields falling. Chinese shares have stopped their decent, perhaps the alleged injection of cash from the government worked, for now. The expectation that the global...

Tuesday 9th March 2021Us Treasury yields pushed steadily higher overnight, reaching 1.6 percent for 10 year Treasuries. These higher rates have loosened the appetite for tech stocks in the US and Europe, with the NASDAQ falling further. NAB’s Rodrigo Catril says the speed of the rise in bond yields has taken markets by surprise, and a period of consolidation seems reasonable, particularly as the i...

Monday 8th March 2021The US senate has passed the $1.9 trillion stimulus package, so it will almost certainly become law this week. Phil Dobbie asks NAB’s Ray Attrill whether this will add to inflation concerns, particularly as oil is also racing ahead thanks to the OPEC+ decision last week to hold off on easing supply cuts. China’s trade figures over the weekend are another sign that the global e...

Friday 5th March 2021Bond yields are on the rise, in the US and in Australia – for very similiar reasons. Jerome Powell failed to reassure markets that the Fed had a plan to cope with rising yields. As NAB’s David de Garis explains, the Fed governor was saying the Fed had the tools to use if conditionals materially changed, just as conditions were materially changing! In Australia markets were cle...

Thursday 4th March 2021Bond yield have been rising sharply overnight. This time it’s being driven not just by optimism about the speed of the global recovery, but also by the likelihood that the UK government will be issuing around £50b higher than the market expected. Chancellor Rishi Sunak has extended the furlough program through to September, along with other assistance measures. This latest j...

Wednesday 3rd March 2021All eyes will be on Australia’s GDP read this morning, which NAB’s Ray Attrill says is expected to be close to 3% growth QoQ, driven by consumer spending. The warnings yesterday from China’s banking regulator, Mr Guo Shuqing, that the US and Europe face bubbles from excessive leverage haven’t had any lasting impact. The RBA continued to provide guidance that rate rises were...

Tuesday 2nd March 2021The RBA might have left itself with very little to say today, having upped their bond buying in response to the sharp rise in yields last week. With bond yields still significantly higher than they were at the beginning of the year Phil Dobbie asks NAB’s Tapas Strickland what else the RBA can do as the Aussie economy finds itself in a better position than most developed natio...

Monday 1st March 2021Friday saw a reversal in the bond sell-offs earlier in the week, seeing 10 year yields in the US falling back top 1.4%. Phil Dobbie asks NAB’s Rodrigo Catril whether the RBA can ignore this volatility this morning, particularly as they were arguably slow to respond last week, eventually buying up $7 billion of bonds. What impact will Biden’s $1.9 trillion stimulus package have...

Friday 26th February 2021Despite the increasing dovishness of central bankers the markets have been selling government bonds like they are going out of fashion. That’s resulting in huge increases in bond yields in around the world, but particularly in the US and Australia. It’s the pace of the move in yields that’s grabbing attention, says NAB’s Gavin Friend in London. Some are also expecting infl...

Thursday 25th February 2021As the reflation trade continues to push bond prices lower and commodities higher, central bankers are fighting amongst themselves as to who can sound the most dovish. That’s helping push equities a little higher this morning. The Fed’s Jerome Powell and BoE’s Andrew Bailey were both in front of parliamentary committees overnight, each suggesting rates would stay low and...

Wednesday 24th February 2021Many believe the RBA didn’t go far enough on Monday, buying up a $1 billion of bond purchases in the face of sharply rising bond yields. NAB’s Tapas Strickland points to speculation in the AFR today that the RBA will come out swinging today and tomorrow, buying up more state and federal government debt to make up for the shortfall. Elsewhere, US equities are generally d...

Tuesday 23rd February 2021Australian 10 year bond yields have nudged 1.65 percent for the first time since May 2019. NAB’s Rodrigo Catril says the market was clearly disappointed by the RBA’s resolve to deal with the sharp rise in yields. Meanwhile, US Treasury yields have also been on a roller coaster. It’s been the same situation in Europe, although the yields have dropped back now. The COVID bo...

Monday 22nd February 2021There was a big rise in the Aussie dollar and the pound on Friday, both reaching multi-year highs. NAB’s Ray Attrill says rising commodity prices are the single biggest influence on the Australian dollar and the prediction that it could reach 80 US cents by midways through the year could be realised before the end of the first quarter. The pound meanwhile is going strong o...

Friday 19th February 2021There have been big falls in US equities overnight after higher than anticipation jobless claims, showing its not a smooth recovery for the US. Bond yields on both sides of the Atlantic suggest there are inflation concerns but, as NAB’s David de Garis suggests, it’s difficult to draw definitive conclusions when most inflation signs have been in the goods sector where there...

Thursday 18th February 2021There was a strong bounce back in US retail sales in January, helped by the arrival of $600 into most people’s bank accounts. NAB’s Gavin Friend says this is a clear sign of the positive impact of the government’s fiscal stimulus, something that won’t be lost in the negotiations for the next round of support measures. Inflation continues to be a debating point in the US,...

Wednesday 17th February 2021Equities were mixed in the US overnight, but the S&P did manage to claw out a new record high, whilst the NASDAQ fell. The biggest movements, though, have been in treasury yields, particularly in the longer end of the curve. Phil Dobbie asks NAB’s Rodrigo Catril where the money is going, if it is leaving government bonds and not piling into equity markets. The new high...