We’ve added futures-implied rates from the central bank, based on ASX short-dated interest rate futures. This adds to similar data we have previously added from the Fed, ECB, BoJ, BoE, BoC, SNB, and Riksbank.
Amid surging wage growth and inflation, market participants are anticipating that the Reserve Bank of Australia keeps rates elevated for some time. The cash rate target is seen at around 4.35 percent until late this year or early next year. A dovish pivot is not seen until later in 2025.
We’ve added auction details for 17-week Treasury bills. The data includes category-wise tendered and accepted amounts, the bid-to-cover ratio, the high-low and median discount rates, and the allotted percentage at the high discount rate.
Our chart uses three panes to reflect a common theme: since June, these bills have been in high demand (and a great substitute for cash) given that they have offered a 5 percent rate or more. The right side of our chart is shaded light gray to reflect the onset of this appealing investment environment.
The top pane tracks the bid-to-cover ratio from late 2022 and compares it against the mean (about 3) during that time period. The increased demand since mid-2023 is clearly visible.
We’ve overlaid a pink-shaded area reflecting the difference between the high discount rate and the low discount rate (measured on the right-hand axis): the smaller the difference, the more unanimous the bidders are in pricing the T-Bill closer to the median rate. This difference has steadily narrowed in the second half of 2023 even as the median rate stayed elevated.
The second pane indicates the percentage of allocations at the high discount rate (analogous to allocations at a low price, given that yields and prices are inversely related – as is also evident in the third pane). The mean percentage allotted at the highest rate (lowest price) since October 2022 is about 55 percent. But in the second half of 2023, that mean has dropped to 47.7 percent – meaning more bidders were willing to purchase the T-Bills at a higher price.
The median discount rate for 17-week T-Bills is currently about 5.25 percent, as the final pane shows.
We’ve added weekly data from Bruegel on EU natural-gas imports from Russia. Specifically, we’ve included five new time series: one tracks gross imports, while the other four track specific transit routes – Nord Stream, Ukraine Transit, Yamal and Turkstream.
The first of our two charts uses the gross imports series to show how Russia’s share of the EU gas market has been shrinking. At the start of 2021, Russia (in orange) supplied almost half of the bloc’s import needs. The subsequent effects of the Russia-Ukraine war, sanctions and the bombing of Nord Stream are obvious. Russia has been overtaken by Norway and is now almost level with Algeria. The “rest of world” category, which includes LNG exports from the US and Qatar, has also grown substantially.
As the legend shows, Norway currently provides the EU with about 1,900 million cubic meters (MCM) of gas.
The second chart sheds light on the four transit routes from Russia. At the start of 2021, Nord Stream had the most share, with about 1,200 MCM per week. Ukraine Transit and the Yamal Pipeline (which crosses Poland) each transited about 800 MCM. Again, however, the impact of the Russian invasion of Ukraine, Nord Stream’s supposed maintenance outage and the Baltic Sea pipeline’s subsequent sabotage are clearly visible.
Nord Stream imports vanished from August. Supplies from the Yamal pipeline were shut off even earlier in 2022.This effectively leaves only Turkstream and Ukraine Transit. Together, they accounted for 725 MCM of imports as of the 47th week of this year. That’s a far cry from aggregate Russian imports that surpassed 3,000 MCM at the start of 2021.