19 January 2015
Key Market Movements
EQUITIES
ASX 200
S&P 500
Dow Jones
NASDAQ
Euro Stoxx 50
Nikkei
Shanghai Composite
Close
5,299
2,019
17,512
4,634
3,202
16,864
3,376
1 week
-3.0
-1.2
-1.3
-1.5
5.2
-1.9
2.8
% CHANGE
1 month
2.7
0.3
0.9
-0.2
4.9
0.3
10.3
1 year
-0.1
9.8
6.4
10.4
1.5
7.2
68.4
CURRENCY
AUD/USD
AUD/JPY
AUD/EUR
AUD/GBP
AUD TWI*
Close
0.8223
96.69
0.7108
0.5428
66.80
1 week
0.2
-0.5
2.6
0.3
0.6
1 month
1.2
0.3
8.0
4.1
1.7
1 year
-6.4
5.5
9.6
1.5
1.7
RBA market pricing, %**
COMMODITIES
Oil WTI ($US/bbl)
Iron ore ($US/t)
Thermal coal ($US/t)
LME Metals Index^
Close
48.7
68.6
60.6
2,755
1 week
0.7
-3.6
0.2
-3.4
1 month
-13.8
0.8
-4.0
-6.8
1 year
-48.4
-47.4
-27.5
-13.4
AUSTRALIAN ECONOMICS
Gross domestic product, %
Unemployment rate. %
Headline inflation, %
Core inflation (trimmed mean), %
FIXED INCOME
Australian cash rate
Close
2.50
BASIS POINT CHANGE
1 week
1 month
1 year
0
0
0
Australian bank bills
Mar-15
Jun-15
2.61
2.48
2
0
11
10
-19
-51
Australian government bonds
3 year
10 year
2.04
2.52
-7
-16
-13
-28
-83
-153
Australian yield curve
3s-10s
48
-10
-16
-69
US government bonds
2 year
10 year
0.48
1.84
-8
-11
-13
-30
11
-98
20 percent chance of rate cut at next meeting
Close
2.7
6.1
2.3
2.5
1 quarter
0.0
-0.1
0.0
0.0
1 year
0.5
0.2
-0.4
0.0
3 years
-0.5
0.9
-0.7
-0.3
Source: Bloomberg. Note: Weekly, monthly and yearly changes are approximate only. ^Index includes copper, aluminium, lead, tin, zinc and nickel. *TWI equals trade
weighted index. **Probability of a 25 bps tightening or easing of monetary policy at the next meeting of the RBA.
The week in review

Global bond markets continued where they left off from the end of
calendar year 2014, rallying strongly last week. US Treasury prices
climbed higher on the back of some weaker than expected US
economic data, weaker corporate earnings announcements and a
surprise decision by the Swiss National Bank (SNB) to ditch a threeyear old cap on the Swiss franc against the euro. The latter factor
probably had the greatest impact on bonds, given the SNB had said
as recently as the beginning of the week that the cap remained the
cornerstone of the central bank’s policy and for Australia the
announcement completely eclipsed a drop in the unemployment rate
from 6.2% to 6.1%.

By way of background, the Swiss implemented the cap during the
global financial crisis to protect the Swiss economy from large
capital inflows as investors searched for a haven from widespread
market turmoil. One speculated reason for the dropping of the policy
is that quantitative easing in Europe could make the SNB’s task of
holding its currency down much harder.

Therefore, as the upper limit on the currency was removed, the SNB
sought to discourage new flows into Swiss francs by further pushing
down its interest rate on some cash deposits held at the central bank
by commercial banks and other financial institutions. To the extent
that made Swiss bonds less attractive in a yield sense, it increased
the attractiveness of relatively high yielding markets such as the US
and Australia. Indeed, post the Swiss announcement the yield on
Australian government debt fell to a record low of 2.509%.
Chart of the week
,
Source: TCV & Bloomberg

After languishing at around $1.25 for much of 2014,
Qantas staged a remarkable turnaround in the last three
months of 2014. Indeed, the stock surged to a closing
high of $2.61 on 6 January 2015. An important catalyst
for the renewed vigour appeared to be the rapid decline
in the oil price in the last three months of last year. US
crude plunged almost 41% from end October to end
December, while the Qantas share price leapt almost
73%.
TCV Borrowing Rates* - as at 16 January close
Maturity
Yield
Maturity
Yield
TCV Hotstock
Yield
FRN Margin
Cash
2.50
5 Year
2.44
15-Nov-2016
2.31
-0.15
90 Day
2.67
6 Year
2.53
17-Nov-2017
2.33
-0.08
180 Day
2.71
7 Year
2.64
15-Nov-2018
2.38
-0.13
1 Year
2.48
8 Year
2.74
15-Jun-2020
2.46
-0.14
2 Year
2.31
9 Year
2.81
17-Oct-2022
2.69
-0.05
3 Year
2.34
10 Year
2.88
17-Dec-2024
2.85
-0.02
4 Year
2.39
15 Year
3.15
17-Nov-2026
2.95
-0.02
TCV Investment Rates* - as at 16 January close
Maturity
Yield
Maturity
Yield
Cash
2.45
120 Day
2.74
30 Day
2.63
150 Day
2.74
60 Day
2.69
180 Day
2.75
90 Day
2.71
1 Year
2.49
GBID Annualised
Return
2.74
* These are indicative rates only and cannot be relied on as the actual rates may vary daily. Actual rates can be obtained by calling Treasury
Corporation of Victoria on 03 9650 7577. ** Based on 3-month rolling average, then annualised
TCV interest rate forecasts
Mar-15
Jun-15
Sep-15
Dec-15
Cash
2.50
2.50
2.50
2.50
90 Day Bank Bills
2.55
2.60
2.60
2.65
3 year CGL bonds
2.15
2.30
2.55
2.85
10 year CGL bonds
2.80
2.95
3.15
3.35
3 year TCV bond
2.40
2.55
2.80
3.10
10 year TCV bond
3.10
3.25
3.45
3.65
Cash
0.13
0.25
0.25
0.50
US 10 year T notes
2.10
2.30
2.60
2.85
Australia
Victoria
United States
Weekly Economic
Review
19 January 2015
Week ahead: 19 – 23 January
The following are Australian economic data releases this week. Key releases are bolded.
Date
01/19/2015
01/19/2015
01/19/2015
01/19/2015
Time
10:30
10:30
11:30
11:30
Event
TD Securities Inflation MoM
TD Securities Inflation YoY
New Motor Vehicle Sales MoM
New Motor Vehicle Sales YoY
Period
Dec
Dec
Dec
Dec
Survey
‐‐
‐‐
‐‐
‐‐
Prior
0.10%
2.20%
‐0.60%
‐3.80%
01/20/2015
01/21/2015
01/21/2015
01/22/2015
01/22/2015
9:30
10:30
10:30
11:00
11:00
ANZ Roy Morgan Weekly Consumer Confidence Index
Westpac Consumer Conf Index
Westpac Consumer Conf SA MoM
Consumer Inflation Expectation
HIA New Home Sales MoM
Jan‐18
Jan
Jan
Jan
Nov
‐‐
‐‐
‐‐
‐‐
‐‐
112
91.1
‐5.70%
3.40%
3.00%
*Sources: Bloomberg & TCV. Not available/applicable = n/a
TCV Contacts
TCV Economic Services:
Mark Tracey
03 9651 4819
TCV Client Services:
Steve Bikakis, Neil D’Vauz, Tania Ventura & Allister Lahood
03 9911 3636
TCV Project Advisory Services:
Robert Hibbard & Nathan Carr
03 9651 4800