ACGBs Richen On Dovish Shift From The RBA

The RBA increased the cash rate by 25bp, as widely expected, but more importantly for the market, it watered down the hawkish message contained in the February statement by dropping the reference to “increases” in interest rates over coming months and replacing it with “further tightening of monetary policy will be needed” meaning at least one more 25bp hike to come. The RBA suggesting that the inflationary peak is in the rear-view and showing less worry re: a wage price spiral also aided the bid in the space.

• ACGBs richen 10bp+ after the decision with YM +11.0 and XM +6.0 at typing, a few bp back from their respective post-decision highs. Cash ACGB yields are now 4-11bp lower on the session and the 3/10 curve is 5bp steeper. A similar move in swaps with little movement in EFP. The 3s10s curve is 5bp steeper.
• RBA-dated OIS as would be expected has seen pricing soften by 4-13bp led by later meetings. Terminal rate expectations are around 4.05% versus 4.13% prior to the RBA decision, after briefly showing below 4.00%.