Off Lows, Survey Data Adds Weight To RBA’s “Narrow Path” Thesis

Aussie bonds operate just off of worst levels in the weak of the latest NAB Business survey, which saw a fall in both conditions and confidence. YM is -3.0, while XM is -1.1, with the wider cash ACGB curve seeing a similar degree of bear flattening. EFPs hold narrower on the day, suggesting the move is bond, not swap, driven. Local data hasn’t had much impact on the space, with an uptick in U.S. Tsys helping ACGBs find a bit of a base.

• The details of the NAB survey revealed that “with activity holding up there are few signs of any turnaround in inflation... Overall, the survey highlights a growing concern that the economy’s strength over 2022 is set to come to an end as we enter 2023, and forward orders have softened, reflecting a more uncertain outlook. In fact, the gap between current business conditions and business confidence is now at a record level in the history of the survey - with the exception of March 2020 - pointing to heightened concerns about the resilience of the economy in the period ahead as inflation and higher rates weigh on consumers and global growth slows.”
• This came after the Westpac consumer confidence saw an uptick, although the survey collator noted that “the level of the Index remains comparable with the lows seen during the COVID pandemic and the Global Financial Crisis.”
• In sum, the outlook provided by the two surveys gives further credence to the RBA’s assessment re: the narrow path that the economy is on at present.