A Familiar Names Drives Front End Rally

As alluded to in a previous bullet, it would seem that the RBA call of Westpac Chief Economist Bill Evans (“hikes of 50 in July; 25 in August; pauses in September/October; 25’s in November; December; February for a peak terminal of 2.35%”) has supported the front end of the AUD rates curve, with Dec IBs now pricing in a cash rate of ~3.45%, per BBG’s WIRP function (down from circa 3.85% ahead of RBA Governor Lowe’s Tuesday address). IBs still price in ~260bp of tightening across the remaining 6 meetings of ’22. A reminder that Governor Lowe sounded sceptical that the Bank would deliver such a pace of tightening when questioned on the matter on Tuesday. A quick reminder that he has referenced 2.50% as a level that the cash rate will likely reach at some point. YM last deals +5.0 as a result, while XM is +2.0, with a relatively parallel round of richening observed in the 7+-Year zone of the cash ACGB curve. Bills run 6-15bp richer through the reds, with the front end leading on the back of Evans’ call, although the contracts operate 1-2 ticks shy of their respective session peaks.