PRIMER: Governor Lowe On Deck Shortly

RBA Governor Lowe is set to speak shortly (23:00 BST, 09:00 AEDT). Most analysts expect a fresh easing package to be deployed at the Bank's Nov meeting, with most looking for a combination of a cut in the cash rate target, the 3-Year yield target & the rate applied to the TFF (to 0.10% in each case), which would be coupled with a cut to the rate paid on E/S surpluses lodged at the RBA. In addition to this, many look for the RBA to adopt a more typical approach to QE & broaden its focus of ACGB purchases (which has centred on the 3-4 Year zone recently), as well as a potential upping of the scale of the TFF.

• The implied rates of 30-day interbank futures sit at ~8bp through year end. We would like to highlight that this does not represent 17bp of easing from current levels, with overnight cash setting at 0.13% for some time owing to the more than ample liquidity sloshing around the Australian financial system at present. This represents 5bp of easing from current levels. The rate paid on the E/S surplus funds lodged at the RBA currently sits at 0.10%, so we would suggest that market is pricing in a 5bp cut to the interest rate payable on that facility, there or thereabouts, based on the current cash rate-interest paid on E/S surplus relationship.
• Lowe's upcoming address and the minutes from the RBA's Oct decision provide the staging posts for Bank communique to further shape expectations ahead of its Nov decision.