### POV: RBA MAY BE TOO SANGUINE ON MONEY.......>

RBA: ### POV: RBA MAY BE TOO SANGUINE ON MONEY MARKETS

- The RBA's July MonPol meeting mins suggest that it may be underestimating the

structural shift in AU funding mkts. The mins stated that "money market rates in

Aus had been moving broadly in line with those in international mkts earlier in

'18, but in the weeks preceding the meeting had increased independently of other

markets." The Board observed that this "was consistent with the recent pattern

of rising funding pressures at the end of each calendar qtr and noted that it

was uncertain how persistent these pressures would be. As a result, funding

costs for the major banks had risen a little over 2018, reflecting the higher

BBSW rate over this period, but remained low relative to history."

- While the points re: turn into qtr end and rates being low relative to

historical levels hold, the lack of attention given to international demand for

AU securities, tighter money supply and the move in x-ccy AUD basis swaps may

worry some. 3-mo BBSW last fixed around 11bp off of the recent cycle high, but

remains around 50bp > 3-Month OIS, repo rates are settling in a higher range and

x-ccy AUD basis swaps point to at least a short term continuation in the recent.