The twelve month money market liquidity spread has returned to close to its pre-COVID pandemic average. It fell in mid to late 2020 following expansionary central bank policies here and overseas, but rose again from 2021 onwards. The proxy of money market liquidity has a time varying correlation with our sovereign bond term premium – strongly positive during the term premium spike at the onset of the pandemic in 2020 and the recent spike in early 2023, but negative for the period in between.
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