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Cheaper But Slightly Richer After The RBA Decision

AUSSIE BONDS

ACGBs (YM -2.0 & XM -6.5) sit slightly stronger after the RBA leaves the cash rate target at 4.10%, for the fourth consecutive meeting. This was Michele Bullock’s first meeting as Governor. The statement was little changed, which says something in itself - for now it is business as usual at the Reserve Bank. By choosing the Deputy Governor to replace Philip Lowe continuity appears to have been preserved. The Board retained its tightening bias and so has kept its options open for the November 7 decision given updated forecasts and Q3 CPI due on October 25.

  • Cash ACGBs are 2-3bps richer after the RBA decision to be 1-6bps cheaper on the day. The 3/10 curve is steeper, with the AU-US 10-year yield differential at -13bps.
  • The swaps curve has twist-steepened, with rates 2bps lower to 3bps higher.
  • The bills strip has twist-steepened, with pricing +3 to -4. Ahead of the RBA, the strip had bear-steepened.
  • RBA-dated OIS pricing is little changed after the RBA decision. The market had only attached a 12% chance of a 25bp hike today. Terminal rate expectations sit at 4.38%, the highest since late July.
  • Tomorrow the local calendar sees Judo Bank PMIs (Final) released.
  • Tomorrow the AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond.
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