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Minutes of the 7 July BoE meeting released recently indicate several members of the committee are close to voting for a rate rise. “For a number of members, the balance of risks to medium-term inflation relative to the 2% target was becoming more skewed to the upside” but “recent developments in Greece was a very material factor in their decisions” to not vote for a rate rise. One of the other interesting things to come out of the minutes was the “expectation of Bank staff…for growth of 0.7% in both the second and third quarters.”

It was busy week in the Kangaroo market with a few regular players making appearances as well as a few institutions not seen for some time. Two of the World Bank’s agencies, the International Bank for Reconstruction and Development and the International Finance Corporation raised $50m and $700m respectively. More regular issuers, such as Nederlandse Waterschapsbank, KfW Bankengruppe, Rentenbank and Eurofima all added to existing lines.

More details on Kangaroo bonds

The minutes from the RBA’s July meeting were released last week and, as expected, board members showed no signs of agitating for an increase in the official rate. Some interesting discussions took place regarding recent data on job vacancies which “suggested that demand for labour could be sufficient to maintain a stable or even falling unemployment rate”. The reason why it would be sufficient is because “employment had grown more rapidly than the population”. As the population grew less than previously, the weak economy was able to absorb the lower number of jobseekers. However, overall the RBA remains cautious because of the economy’s spare capacity, historically low wages growth and an unemployment rate higher than is desirable. The RBA does not expect non-mining investment to add to growth for some time but profits were rising and business conditions were a bit “above average” and improving. The general view of the minutes among financial institutions is summed up by Deutsche Bank that said, “The tone of the minutes in our view remains consistent with a mild easing bias”.

James Bullard, the president of the St. Louis Federal Reserve Bank but not a voting member of the policy setting committee said, “Next week might be a little early…I’d see September having more than a 50% probability right now” when questioned about Federal Reserve rate increases. The Fed’s Open Market Committee next meets on 29 July.

After reaching agreement with its EU creditors last week and securing further emergency funding of €86bn, the Greek Government cleared its outstanding IMF debt owing from 30 June. It also paid the €3.5bn outstanding loan to the ECB due on 21 July along with €500m borrowed from its own central bank.

QTC issued another $300m of its existing 22 July 2024 series last week following the issue of $1bn of the same line in late May. The bonds were issued at margin of EFP + 32bps. The tender was well bid and had a coverage ratio of 4.73x. Earlier this month the Queensland government tabled its 2015/2016 budget and reported a funding requirement of $6.5bn.

Australian consumers’ confidence has recovered as Greece and China fade from the headlines and iron ore prices stabilise. After taking a battering in mid-July, The ANZ Bank-Roy Morgan index of consumer confidence rose to 111.8 from a previously recorded 107.0 to recover back to its level at the start of the year. ANZ said, “Despite the lift, levels remain subdued and confidence is a vital ingredient missing in the economy…A sustained lift in consumer confidence is key to returning the economy to trend.”

While the price of oil has been falling for some time, the rise from its low in March has placed some pressure on recent US CPI June figures, which were released on 17 July (US time). After a rise of 0.4% for the month of May, June figures came in at 0.3%.

The $117b Future Fund is sitting on $20bn of cash which represents nearly one fifth of the fund’s assets. The Fund’s head of debt and alternatives, Jame Swaldron told a conference last week cash as a percentage of assets had risen from 15% held in March. He said the reason for the high proportion of cash was because much of the equities, bonds and alternatives market were overvalued as a result of the low-interest rate environment.

The governor of the BoE, Mark Carney gave a speech earlier this month and indicated UK’s official rate would probably rise by the end of the year. However a recent survey of economists suggests the private sector is not expecting an increase until the first quarter of next year, to be then followed by another two by the end of 2016. Current cash rate expectations indicate only a 28% chance of a rate move by the end of 2015 but the speech seems to have influenced markets enough for participants to bring forward their estimated dates for the first rate increase.