Further Support As RBA Removes Reference To Low Level Of Rates

Aussie bonds have extended their move away from session lows in the wake of the latest RBA decision after the Bank delivered the expected 50bp rate hike, reaffirmed its previous guidance re: further normalisation in the months ahead, but removed the reference to interest rates being at low levels, while explicitly noting that higher interest rates are impacting household spending. The Bank still feels that the strong domestic economy will provide it with a base to tighten further, but there was a slightly more cautious feel to the post meeting statement given the above tweaks. Well-defined global risks were once again highlighted in the statement. We would suggest that a combination of the U.S. Federal Reserve decision i.e. the magnitude of the hike deployed by the Fed & the domestic Q2 CPI print will figure heavily in the Bank’s August deliberations (when it is set to debate implementing a 25 or 50bp hike).

• Note that the space was already moving away from its early Sydney troughs, tracking the beat of the wider core global FI space. The initial move away from lows came with e-minis moving back from highs, Chinese equities pushing lower on the day, crude back from best levels and no real progress observed in the latest phone call between senior U.S. & Chinese policymakers (after a knee jerk risk-on move was seen on the back of confirmation that the phone call between Yellen & Liu He took place).
• That leaves YM -3.5 and XM -1.5 at typing, at little shy of their respective post-RBA peaks, while the longer end of the cash curve is ~1.5bp cheaper on the day, with a fairly parallel shift observed in the 7+-Year zone. Bills run flat to -4 through the reds, bear flattening.
• Tomorrow’s domestic docket is headlined by A$800mn of ACGB Apr-33 supply.