A Higher Cash Rate Setting, New RBA Deputy & Syndication News

An active start to the new quarter for the space, with the weakness in U.S. Tsys applying some pressure early on, before Australian Treasury Sec Kennedy (who also sits on the RBA board) noted that inflation risks are on the upside, while stressing that an orderly movement of fiscal/monetary policy to maintain low unemployment will be pivotal. He went on to note that there is an opportunity for monetary policy to “normalise,” while tipping his hat to risks that wage growth may exceed forecasts (notable wage growth is the need that the RBA constantly refers to when it comes to outlining its views on the path of policy). Also note that the effective interbank overnight cash rate set at 0.09%, 1bp off the RBA’s 10bp target, after setting at 5bp and below since Nov ’20. This would have provided further pressure for the space, on top of Kennedy’s relatively hawkish remarks. Resultant price action was volatile, with losses pared relatively quickly.

• XM then blipped lower on the ACGB Nov-33 syndication announcement (due in the w/c 11 April), before recovering above pre-announcement levels. Note that many expected such an announcement (some even expected pricing next week), while next week’s AOFM issuance slate is light in the runup to syndication, with that combination likely facilitating the bounce after the initial early hedging flows subsided.
• The space then meandered through the remainder of Sydney hours, blipping higher into the close. YM -3.5 & XM +1.5, comfortably off of lows and session flats.
• Elsewhere, RBA Assistant Governor Bullock was promoted to Deputy Governor after Debelle’s recent, impromptu resignation, in turn making her the favourite to succeed RBA Governor Lowe at the end of his term (while seemingly promoting a feeling of continuity as opposed to upheaval).