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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
STIR
Yesterday’s stronger employment data when combined with the robust NAB Business Survey should have encouraged the market to move closer to a 25bp hike from the RBA in April. RBA Governor Lowe had explicitly cited both releases as important inputs to next month's policy decision. AU STIR however seemed to dismiss that message, maintaining its pricing for an end to the tightening cycle with 38bp of easing by year-end.
- Global banking concerns appeared to be the most likely reason yesterday. Today, however, with global STIR marked substantially higher on the back of risk-on sentiment and a 50bp hike from the ECB, the explanation is less obvious.
- RBA dated OIS has scaled back easing expectations for this year by 18bp to 20bp, but the market still believes the peak in the cash rate has been seen with no change at the April meeting.
- For comparison, U.S. and NZ STIR still have respectively 15bp and 25bp of tightening priced.
- The fact that RBA Governor flagged the possibility of pause is likely to have weighed on market pricing for April, although he did cite data dependency and the data has been strong.
- Maybe it is the RBA's performance as a serial undershooter of OIS forward pricing that has the market convinced that a pause is on the cards.
Figure 1: RBA Cash Rate Vs. OIS 6M1M (led 6M)
Source: MNI-Market News / Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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