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STIR: OIS Pricing Firmer Today But RBA Cut In Feb Seen As A Done Deal

STIR
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RBA-dated OIS pricing is flat to 3bps firmer across meetings today. 

  • A 25bp rate cut is more than fully priced for April (128%), with the probability of a February cut at 88% (based on an effective cash rate of 4.34%).
  • The last time the market was this confident about a rate cut was in March 2020, when expectations proved correct—the RBA cut rates twice that month, once at the scheduled meeting and again on the 20th.
  • Notably, the last time the RBA disappointed market expectations by not cutting when a more than 75% probability was priced was in November 2012. However, even then, the RBA cut by 25bps in the meetings on either side—October and December 2012.
  • Based on historical patterns, it would be highly unusual for the RBA not to follow through on market expectations, especially since it has made no attempt—officially or unofficially—to steer expectations away from a cut, as it has done in the past.

 

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RBA-dated OIS pricing is flat to 3bps firmer across meetings today. 

  • A 25bp rate cut is more than fully priced for April (128%), with the probability of a February cut at 88% (based on an effective cash rate of 4.34%).
  • The last time the market was this confident about a rate cut was in March 2020, when expectations proved correct—the RBA cut rates twice that month, once at the scheduled meeting and again on the 20th.
  • Notably, the last time the RBA disappointed market expectations by not cutting when a more than 75% probability was priced was in November 2012. However, even then, the RBA cut by 25bps in the meetings on either side—October and December 2012.
  • Based on historical patterns, it would be highly unusual for the RBA not to follow through on market expectations, especially since it has made no attempt—officially or unofficially—to steer expectations away from a cut, as it has done in the past.

 

Keep reading...Show less