Cheaper Post-Bullock

Aussie bonds cheapened in the wake of a speech from RBA Deputy Gov Bullock. The language that Bullock deployed in her initial round of remarks provided little in the way of RBA worry surrounding households in the rising rate environment. She did note that risks to the household sector from rising rates “are a little elevated”, although she pointed out that “while housing prices have started falling in recent months, they would have to fall a fair way for negative equity to become a systemic concern.” Note that in the subsequent Q&A Bullock pointed to previous RBA work (from ’17) which suggested that the neutral real rate is somewhere between 0.5-1.5%, when questioned on the matter. This allowed Aussie bond futures to register fresh session lows, before the contracts nudged away from worst levels, aided by a light bid in U.S. Tsys.

• Cash ACGBs run 7.0-8.5bp cheaper across the curve. YM is -7.5, operating through its overnight low, while XM is -7.0 after briefly showing below its own overnight low. Bills run 5 to 12 ticks lower through the reds, bear steepening.
• The release of RBA minutes earlier in the session provided little in the way of surprises, with the Bank reaffirming the need to tighten policy further, ultimately provoking little reaction in ACGBs at the time. The highlight of the release revolved around the RBA’s acknowledgement that the cash rate is “well below” the lower estimates of neutral, alongside a clear desire to continue to anchor medium-term inflation expectations.
• Wednesday will see RBA Governor Lowe speak at the Australian Strategic Business Forum, while A$800mn of ACGB May-32 will be on offer.