Kit Lowe

All my RBA interest rate forecasts February 2020 to August 2023 . linkedin.com/pulse/rba-comm…

The Brent curve still sits in heavy backwardation and the whole curve sits higher than one month ago implying a longer turn rise in inflation. As Ben Emons from Fed Watch advisers points out the batch of global PMI data already indicates the potential for irreparable damage to the global economy. The S&P surveys said specifically that manufacturers signalled the steepest month-on-month rise in input price inflation since 1992.

Pre dates the surge in fuel prices in March. Just another month for headline and core CPI to be above the 2.5% target and the 3% top of the band. CPI shows Australia had an inflation problem prior to the Iran war start date.

@kit_lowe Hervey Bay! 🤣

From the vault. Jan 2021. Yamba is still not the new Byron. #RBA

@cmkusher I’ve been going to both since I was a kid but Yamba lacks an airport anywhere near it plus surprisingly I find it has more mozzies, midgies and sand flies despite being further south than Byron. But it has way less in town traffic so that’s a plus.

@kit_lowe Hot take, Byron is beautiful but sucks Yamba is way better.

*EU, AUSTRALIA AGREE TO FREE TRADE DEAL, JOINT STATEMENT SAYS

I expect some sort of EU-Australia FTA to be signed this week. Of interest would be the reaction of party political leaders to this particularly the leader of the current populist party. When will the media ask the hard questions?

NZ announcing targeted fiscal stimulus $NZD *NZ'S WILLIS: SUPPORT FOR 12 MONTHS OR UNTIL FUEL UNDER NZ$3/L *NZ'S WILLIS: ABOUT 143,000 FAMILIES TO GET NZ$50 MORE A WEEK *NZ'S WILLIS: GOVT TO PROVIDE SUPPORT FOR FAMILIES FROM APRIL 7

“We are likely to see higher headline inflation over the near term, and somewhat weaker growth momentum,” Governor Breman says.

$NZD Will be an interesting speech by RBNZ Gov Breman tomorrow. The RBNZ had previously advised that the speech would touch on the current economic outlook, drawing on insights from the February Monetary Policy Statement, but market interest was heightened after the narrative to the speech was changed to talking about the wider economic impact of the ongoing conflict in the Middle East. NZ 2y swap yields have risen 78bps since the start of the month and swaps markets have moved from pricing one 25bps hike by end 2026 to 3.5 hikes. Since Breman is new to the Antipodes she needs to talk tough on inflation particularly with the govt likely to announce some sort of targeted stimulus on the same day. The RBNZ much like the RBA, has a bad starting point with inflation at 3.1% already above the top of the 1-3% target band before the current crisis.

Consumer inflation expectations almost at 7% which partly explains the record low in consumer confidence along with the RBA rate hike. #auspol

More issues in private credit *APOLLO CAPS PRIVATE CREDIT FUND WITHDRAWALS AS REQUESTS HIT 11%

@IFM_Economist They hedge via longs in WTI futures but the crack spread is way wider so they are severely under hedged

Air travel costs could rise as aviation fuel prices rise sharply, another upside risk to CPI. However major airlines hedge fuel costs and long a 24 months out so this may temper some of the increase.

IEA's Birol: Hopes Australia Takes Positive Steps To Meet Fuel Reserve Requirements After Current Shock. Oh look the IEA agrees with me. But anyway some accounts can keep posting their straw man arguments.

Australia is well under the IEA 90-day minimum stockholding obligation for oil. #OOTT #Auspol. I'm not sure who made this decision in the government but the Australian people would like to see some accountability. Chart source GS/IEA

@ALBACapMgmt The Monday morning gap down buy in ES on a APAC Monday morning? Has literally worked for decades but who knows with Donny lately

Vix term structure only flattening out to May at these prices, back end is actually coming tighter.

@Mark_Graph #DYOR

@kit_lowe It is also import for explaining there was no overt decision of of governments

On Friday Fitch Ratings has revised the Outlook on New Zealand's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and affirmed the IDR at 'AA+'. $NZD

@Mark_Graph Where did I say in my tweet that is was 90 days of import cover? As per usual you just make it up! Read the goddam chart it literally says in brackets (days of net imports)!

It’s not 90 days of fuel consumption cover, it’s 90 days of import cover. It happened with little change to our consumption cover as we moved from being a largish producer of crude oil to mostly an importer of refined products. It also happened because the fuel industry embraced just in time import practices. We all got cheaper fuel from JIT. A focus on being green meant that future oil exploration and development was curtailed. While there was no actual decision to reduce iIEA mport cover levels, governments since 2012 ignored the IEA warnings.

Next worse probably New Zealand. After the Feb 18 RBNZ meeting only 14bps of hikes priced by end 2026 the market is now pricing 76bps ie 3 hikes by end 2026. $NZD

Worst hit market probably the UK. After the Feb MPC, $GBP OIS priced ~ 37bps of CUTS by end 2026 but it is now pricing 77bps of HIKES. The carnage in SONIA has been dramatic. Some domestic economists would have you believe that the RBA is acting out of synch but choose to ignore global macro at your peril.

A dramatic repricing across swaps curves across all DM rates markets since the start of the Iran war. Only the US Fed is left riced for a cut and not until Sept 2027