ACGBs Surge On 25bp RBA Hike, Reassessment Of Terminal Pricing Seen

The surprise 25bp hike from the RBA put an immediate bid into the Aussie fixed income space, with terminal pricing reassessed (it had looked stretched at over 4.00%), falling back to ~3.60% vs. the ~4.10% level seen late Friday/early today. A reminder that ~45bp of tightening was priced into dated OIS covering today’s RBA meeting.

• 3-Year ACGB yields plummeted to near 3.00% vs. the ~3.45% see ahead of the decision, before rebounding to trade around the 3.20% mark. Cash ACGBs run 20-40bp richer across the curve, with 3s leading.
• Bills have surged on the repricing of expectations surrounding the RBA’s terminal rate, running 50-70bp firmer on the day through the reds.
• The Bank has noted that it expects to increase interest rates further in the period ahead (previously it flagged in “the months ahead), while it noted the speed of the previously deployed tightening and the deteriorating global conditions in its post meeting statement (seen here). Household consumption remains key, and it seems that the lagged impact of monetary policy was integral to the RBA’s thought process when it came to slowing rates, as opposed to pushing on with another 50bp hike, which is understandable given the levels of debt observed in the Australian economy.
• The Bank also dropped the reference to monetary policy not being on a pre-set path.