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STIR

SOFR Decline, Potential Drivers

GILT PAOF RESULTS

GBP562.500mln of the 0.25% Jul-31 gilt sold

US TSYS

Repo Reference Rates -- SOFR Dips to 0.03%

  • The updates surrounding the economy were more of a mark to market exercise for the Bank, with no change in its underlying view surrounding inflation, although it underlined the better than expected performance of the labour market in recent times.
  • We should highlight that the RBA removed the following phrase from its June statement: "The Board is prepared to undertake further bond purchases to assist with progress towards the goals of full employment and inflation." The passage re: that particular matter now reads as follows: "At the July meeting the Board will also consider future bond purchases following the completion of the second $100 billion of purchases under the government bond purchase program in September. The Board continues to place a high priority on a return to full employment." The omitted sentence resided between the 2 remaining sentences in the May statement. There seems to be 2 trains of though on the sell-side re: the matter:
  1. The sentence wasn't required given the Bank's guidance on making a decision on the matter in July (a tidying up exercise if you will).
  2. It presents a possible reference to tapering its bond purchases.
  • As the tweak came in the wake of the guidance given in May we are inclined to suggest that the RBA is looking to bake some optionality in ahead of its upcoming decision on its ACGB purchases, at a minimum. There was little in the way of outright market consensus on that particular front, with varied views on what the size of the Bank's next round of bond purchases would be (views were generally split between A$50bn and A$100bn over a ~6-month horizon).

Please use the following link to access the full review:

RBA Review - June 2021.pdf

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com