ANZ: Implications For Relative ACGB Performance On RBA "Pure QE"

ANZ note that "RBA Governor Lowe has flagged that the RBA might consider a "separate bond buying program" in addition to its policy of yield curve control. We have already factored such a move into our forecasts, but the comment suggests it might come earlier than we thought. We think the RBA will consider other options, like extension of the Term Funding Facility before moving to pure QE. Even if it is someway off, flagging pure QE explicitly could impact bond pricing from now. That the 10y ACGB/UST spread has dropped to its lowest level in some time may point to this. At the very least, we think the comment is likely to limit the upside in the 10y ACGB/UST spread from here. We think market direction has played a role in the recent outperformance, but the RBA policy curve has flattened relative to that of the US Fed. The discussion of more policy options by the RBA has likely played a role."