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Bear Flattening After RBA Points To Multiple Hikes


Aussie bonds were pressured after the RBA board delivered the expected 25bp hike, while pointing to further rate hikes in the months ahead (we place emphasis on the plural in future hikes). Terminal cash rate pricing has shifted above 3.90% to reflect this, after printing around 3.75% pre-decision.

  • The Bank also tipped its hat to firm domestic demand resulting in more meaningful inflationary pressure, albeit while providing a sense of increased worry re: the health of some households (alongside some firmer language against the risks of a de-anchoring of inflation expectations, although it reaffirmed that expectations remain well anchored at present).
  • The Bank didn’t allude to its updated underlying inflation forecasts (which will be published on Friday), while it only expects headline inflation to return to the upper end of the target range in ’25.
  • Aussie bond futures breached their early session lows on the move, after firming off their early Sydney lows ahead of the RBA decision. YM finished -16.0, while XM was -13.5, a touch off their respective post-decision bases, while wider cash ACGBS sit 7.5-15.5bp cheaper as the curve bear flattens, reflecting the pricing of more aggressive RBA tightening near-term.
  • The AU/U.S. 10-Year yield spread widened post-RBA, pushing out by half a dozen bp on the day to ~-2bp, briefly testing above parity.
  • A$1.0bn of ACGB Nov-33 supply headlines domestically on Wednesday.
Fig. 1: The Recent Evolution Of Market Pricing Surrounding The RBA Cash Rate

Source: MNI - Market News/Bloomberg

MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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