Via Damien Boey at Credit Suisse comes the big three:
1. Out-of-cycle rate hikes. The spread of bank bill swap rates to overnight indexed swap rates has come in after financial year-end, but still remains elevated by historical standards. Current spread levels have historically been consistent with margin pressures for banks, and eventually, out-of-cycle rate hikes.
2. Credit tightening. We are only just starting to see the impact of money market tightness, macro-prudential tightening and the Bank Royal Commission on loan approvals and credit growth. Leading indicators point to more weakness in the credit impulse to come.
The full text of this article is available to MacroBusiness subscribers
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
