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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUSSIE BONDS
Note that Monday's rally in bonds allowed the IB strip to unwind some of the recent RBA rate hike premium that had become embedded, with late '22/early '23 contracts rallying by 12-13bp on the day (granted those contracts are illiquid and many/all of them won't have traded during the session).
- The IB strip had a 15bp hike more than fully priced come the end of April '22 at yesterday's settlement (with 16.5bp of tightening vs. the current effective cash rate of 0.03% observed), assuming the current relationship between the cash rate target and effective cash rate holds if/when a 15bp hike is deployed (owing to excess liquidity dynamics).
- Further out the strip, 132bp of tightening was priced come the end of March '23, per yesterday's settlement levels.
- The market is still much more aggressive than the RBA when it comes to its view re: the trajectory of the cash rate. The RBA is expected to remove its yield curve targeting mechanism later today, which will open the way for a tweak in its forward guidance, but the new offering on that front isn't expected to be anywhere near as aggressive as market pricing.
Fig. 1: Implied Cash Rate Pricing In The IB Strip
Source: MNI - Market News/ASX/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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