Little Changed After RBA Minutes Release

ACGBs are little changed (YM +1.0 & XM -0.5) after the release of the RBA Minutes for the July meeting, which saw the Board leave the cash rate at 4.10%.

• During a policy meeting, members discussed the Australian economy's inflationary pressures and labour market tightness. Two options were considered: increasing the cash rate by 25bp or keeping it unchanged. Despite inflation remaining high, the decision was made to hold the cash rate steady due to the recent rapid tightening of monetary policy and uncertainties surrounding the economy's outlook. Members acknowledged that some further tightening might be necessary to achieve the inflation target but would reassess the situation in the August meeting, taking into account additional data and forecasts. The board's priority remained to return inflation to target within a reasonable timeframe.
• Cash ACGBs are flat to 1bp richer with the AU-US 10-year yield differential at +17bp.
• Swap rates are 1bp lower.
• Bills pricing is +1 to +3.
• RBA dated OIS pricing is 1-3bp softer across meetings with a 36% chance attached to a 25bp hike in August. Terminal rate expectations sit at 4.41% (Feb’24).