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ACGB Apr '24/Nov '24 Yield Spread Widens A Touch Post RBA

AUSSIE BONDS

{AU} AUSSIE BONDS: The ACGB Apr '24/Nov '24 yield spread has widened by a little over 2.0bp since the RBA decision i.e. reflecting less chance of the RBA rolling over its 3-Year yield targeting scheme to ACGB Nov '24 from ACGB Apr '24. This is likely a product of the previously flagged tweak to the Bank's concluding paragraph, which noted that "the Board is committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently. This is unlikely to be until 2024 at the earliest." The inclusion of "unlikely" in the final paragraph was the key tweak here, reflecting a slightly lower degree of assurance from the Bank vs. the previous language deployed. As a reminder, today's decision saw the Bank reveal that "at its July meeting, the Board will consider whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity, the November 2024 bond. The Board is not considering a change to the target of 10 basis points. At the July meeting, the Board will also consider future bond purchases following the completion of the second $100 billion of purchases under the government bond purchase program in September."


Fig. 1: ACGB Apr '24/Nov '24 Yield Spread (%)

Source: MNI - Market News/Bloomberg

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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