ANZ rates strategist Martin Whetton compares the rates market to the plumbing in your house. It’s usually working away but when things start going wrong you really notice it, and addressing the issue can involve a non-trivial cost.
The short-term money market — where institutions lend to each other — has seen some minor upheaval lately in Australia as interest rates globally have started to shift higher. This has led to some smaller lenders raising their mortgage rates and whether the larger banks may need to eventually follow suit is an open question.
On this week’s episode of the Devils and Details podcast we take a deep dive on the world’s vast fixed income markets, which cover everything from government bonds to more complex trading operations like overnight index swaps.
It’s an area that doesn’t always draw a lot of attention but it is a vastly bigger market than that for stocks and involves the world’s most sophisticated investors. Tune in and listen to what we hope is an enlightening discussion about yield curves, LOIS, BOB, EFFR and other elements of this critically important area of markets.
Whetton, who is senior rates strategist at ANZ, refers to this chart showing the OIS curve which reflects the market’s expectations of the direction of the Reserve Bank’s cash rate.
Modest flattening of the RBA meeting date OIS curve. Hiking profile still in, but a full move is a long way out. pic.twitter.com/eGrY3EcbPl
— Martin Whetton (@martin_whetton) July 3, 2018
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