Little Change After RBA Minutes

ACGBs edge away from session cheaps in the wake of the release of the RBA’s May meeting minutes.

• The minutes revealed that the Bank discussed the potential for a 40bp increase in May, although the Board was of the opinion that a 25bp move “would help signal that the Board was now returning to normal operating procedures after the extraordinary period of the pandemic. Given that the Board meets monthly, it would have the opportunity to review the setting of interest rates again within a relatively short period of time, based on additional information."
• YM is -1.0 & XM is -0.5 as of typing, with 10s still providing the firmest point on the wider ACGB curve.
• Elsewhere, RBA discussion touched on inflation psychology matters (a central tenant of wider central bank inflation expectation management).
• On B/S matters, the Bank also noted that “in some years' time, after the Bank's balance sheet had reduced further, the Board would need to consider the broader issue of the longer-term optimal size and composition of the balance sheet, including the size of Exchange Settlement balances. In this context, it might consider the use of longer-term bond holdings, although this would be driven by the appropriate operating framework in light of evolving conditions and would not have implications for, or have a bearing on, the stance of monetary policy."