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AUSSIE BONDS: Little Changed After RBA Leaves Cash Rate At 4.35%

AUSSIE BONDS
RegionGlobalBulletAPACFixed Income BulletsAustraliaMarkets

ACGBs (YM +1.0 & XM flat) are slightly stronger but little changed after the RBA decided to keep the cash rate at 4.35%, as unanimously expected. The RBA Board noted:

  • While inflation has fallen since its 2022 peak, it remains above the 2–3% target range and is not expected to return to target until 2026. However, longer-term CPI expectations remain consistent with the target.
  • Wage pressures have eased, but labour productivity remains low.
  • The Board's priority is to bring inflation back to target sustainably, remaining cautious about potential risks. Future decisions will be based on data and evolving economic conditions, both domestically and globally.
  • Cash ACGBs are 1bp richer with the AU-US 10-year yield differential at +20bps.
  • Swap rates are 1-2bps lower.
  • The bills strip has twist-flattened, with pricing -1 to +2.
  • RBA-dated OIS pricing is 1-2bps firmer after the decision. A cumulative 14bps of easing is priced by year-end.
  • August CPI is released tomorrow with the headline forecast to moderate to 2.7% from 3.5% driven by federal government electricity subsidies. As a result, the trimmed mean will be the focus and was at 3.8% in July.
  • Tomorrow, the AOFM plans to sell A$1.bn of the 3.75% 21 May 2034 bond. 
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ACGBs (YM +1.0 & XM flat) are slightly stronger but little changed after the RBA decided to keep the cash rate at 4.35%, as unanimously expected. The RBA Board noted:

  • While inflation has fallen since its 2022 peak, it remains above the 2–3% target range and is not expected to return to target until 2026. However, longer-term CPI expectations remain consistent with the target.
  • Wage pressures have eased, but labour productivity remains low.
  • The Board's priority is to bring inflation back to target sustainably, remaining cautious about potential risks. Future decisions will be based on data and evolving economic conditions, both domestically and globally.
  • Cash ACGBs are 1bp richer with the AU-US 10-year yield differential at +20bps.
  • Swap rates are 1-2bps lower.
  • The bills strip has twist-flattened, with pricing -1 to +2.
  • RBA-dated OIS pricing is 1-2bps firmer after the decision. A cumulative 14bps of easing is priced by year-end.
  • August CPI is released tomorrow with the headline forecast to moderate to 2.7% from 3.5% driven by federal government electricity subsidies. As a result, the trimmed mean will be the focus and was at 3.8% in July.
  • Tomorrow, the AOFM plans to sell A$1.bn of the 3.75% 21 May 2034 bond.