Further Off Cheaps Into RBA

Aussie bonds continue their bounce from early Sydney cheaps, with YM & XM both -6.0 at typing, while the wider cash ACGB curve sees 3-6bp of cheapening, with the 3- to 12-Year zone leading the weakness.

• The impending RBA decision is the only game in town for participants today (see our full preview of that event here). A 25bp cash rate hike is fully priced into the RBA dated OIS strip and is near enough the unanimous view of sell-side analysts pre-decision.
• That will leave adjustments to the Bank’s economic forecasts and guidance front and centre (assuming such a step is delivered), with cross-currents re: the RBA’s reaction function coming in the form of growing signs of domestic-driven inflation vs. the delayed impact of the already delivered tightening, as well as the fixed rate mortgage agreement runoffs and start of the unwind of the Bank’s TFF as ’23 progresses.
• For reference, terminal cash rate pricing sits at ~3.75% at typing.