Cheaper After RBA Minutes Suggest Rates ‘Steady For Longer’

ACGBs (YM -4.0 & XM -3.0) are cheaper, near Sydney session lows and 2-3bps weaker than pre-RBA Minutes levels.

• The August 6 meeting minutes showed that the RBA Board felt that it could achieve the same tightening of financial conditions as a rate hike by holding rates steady longer than the markets had assumed.
• It remains concerned about the slow return of inflation to target and possible upside risks and as a result “it was unlikely that the cash rate target would be reduced in the short term.”
• The Board remains “vigilant” and even more data-dependent given the uncertainty around its forecasts. Rates are likely to be on hold for some time.
• Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session.
• Cash ACGBs are 3bps cheaper on the day, with the AU-US 10-year yield differential at +6bps.
• Swap rates are 3bps higher.
• The bill strip is -2 to -4 beyond the first contract.
• RBA-dated OIS pricing is flat to 5bps firmer across meetings, with Jun-25 leading. A cumulative 19bps of easing is priced by year-end.
• The local calendar will see the Judo Bank PMI Composite and the Westpac Leading Index tomorrow.
• Tomorrow, the AOFM plans to sell A$800mn of the 3.00% 21 November 2033 bond.