Markets Overview

  • ASX SPI 200 futures little changed at 7,365.00
  • Dow Average down 0.2% to 34,167.77
  • Aussie up 0.3% to 0.6990 per US$
  • U.S. 10-year yield rose 5.6bps to 3.7588%
  • Australia 3-year bond yield fell 1.5 bps to 3.46%
  • Australia 10-year bond yield fell 2 bps to 3.74%
  • Gold spot little changed at $1,854.86
  • Brent futures down 1.1% to $85.64/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$700 Million 4.5% 2033 Bonds
  • 11:15: (AU) RBA’s Lowe-Senate Hearing

The S&P 500 Index closed nearly flat and the two-year Treasury yield added more than 10 basis points after data showed that inflation remained high. Two Federal Reserve officials then warned that the remedy might require higher interest rates for a long period of time, though one policymaker suggested that the end might be near.

Swaps contracts showed traders gave near-even odds for a quarter-point rate increase by the Fed in June, following similar hikes in March and May. The rate-sensitive two-year Treasury yield rose past 4.6%.

Equity indexes fell in the morning as Federal Reserve Bank of Richmond President Thomas Barkin told Bloomberg TV that the central bank might “have to do more”to fight inflation and Dallas Fed President Lorie Logan said rate increases could last “for a longer period than previously anticipated.”

But stocks pared losses after Federal Reserve Bank of Philadelphia President Patrick Harker said that policymakers were nearing the point where rates were restrictive enough: “In my view, we are not done yet … but we are likely close.”

“Stocks are probably rising due to Harker,” said Steve Sosnick, chief strategist at Interactive Brokers. “Close to done on tightening is vague, but certainly not a hawkish tone.”

Oil fell for a second day after the announcement that the US was selling more crude from its strategic reserves.

Other News

Australia’s pandemic-induced property boom in coastal and regional markets is finally running out of steam, with values declining sharply as sellers offer discounts to entice buyers.

CoreLogic Inc.’s Regional Market Update, which examines the nation’s 25 largest non-capital city regions, shows only 13 areas recorded an increase in house values over the year to January 2023, down from 21 over the year to October 2022.

The nation’s most popular lifestyle markets have been hardest hit by softer conditions and the Reserve Bank of Australia’s interest rate increases, said Eliza Owen, CoreLogic head of research.

Many coastal and regional areas — known as sea-change and tree-change destinations in Australia — saw big jumps in value during the pandemic, with demand driven by people’s desire to leave big cities and fueled by ultra-loose monetary policy that sent borrowing costs to historic lows.

But since May, the RBA has pursued an aggressive tightening cycle that’s seen it raise interest rates 3.25 percentage points to cool inflation. The housing market has slumped, with CoreLogic data earlier this month showing the national index is now down 8.9% from its April 2022 peak, the largest and fastest fall in values since at least 1980.

The upmarket coastal and hinterland Richmond-Tweed region, about 800 kilometers north of Sydney, recorded the weakest performance across all metrics, with house market value falling 18.6% in the year to January, sales volumes down 36.1% in the year to November and houses sitting on the market for 71 days. Vendors also dropped prices by about 8.3%.

“This was the region where values skyrocketed, with houses increasing more than 50% during Covid, taking the median house value to more than A$1.1 million,” Owen said. “Since then much has changed with borders reopening, outbound travel returning, workers returning to the office not to mention the overlay of nine rate rises. It’s been a swift and significant shift.”

Still, house prices in the region are up 23.7% on pre-Covid levels.

Houses in the Illawarra region, 90 kilometers south of Sydney, recorded the second biggest yearly fall of 12.6% after values surged 44% through the recent upswing.

Owen said that while some regional markets were experiencing sharp price falls, regional market performance overall remained more resilient than capital city markets.