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CBA On The Actual RBA Cash Rate

RBA

CBA note that “there’s now four days of data to assess where the actual RBA cash rate will trade now that the RBA target rate is 0.35%. The answer appears to be, quite emphatically, 0.31%. All days since the RBA rate change have had an actual cash rate of 0.31%. The first of those was set by RBA expert judgement on the basis of no trades, but since then the market has been trading -infrequently though it is - at 0.31%. The cash market is no longer at the lower bound, but the 6bp spread above the ES rate is holding. There is some trading at this level - but not a great deal. The volumes are often between A$500mn and A$1bn, with between 5 and 10 trades in a day. Before the pandemic this was routinely A$3-5bn with more like 30 to 40 trades a day. For the moment, the RBA does not seem to want to actively drain liquidity from the system. This suggests that the ES rate will be the main driver of the actual cash rate for the next little while. However, as the TFF maturities start rolling off in the middle of next year, this will need to be revisited.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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