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RBA-Dated OIS Strip Calls Time On RBA Hiking Cycle (For Now)

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Fallout from the SVB collapse leaves the RBA-dated OIS strip calling time on the RBA’s rate hiking cycle, with 1-2bp of easing now priced for next month’s central bank gathering, while a 25bp cut is now essentially fully priced for the Bank’s December meeting (RBA-dated OIS covering meetings from August currently all price more than a 50% chance of such a step).

  • A softer NAB business confidence reading (moving into negative territory) will do nothing to push back against this pricing, given that the RBA included it on the list of must-watch data re: monetary policy assessment. The survey collator noted that “while we expect inflation likely peaked in Q4, price growth remains elevated and the survey suggests that while global goods-side pressures have abated somewhat, there has been less evidence of easing in services-side pressures. NAB continues to expect a more material slowdown in demand, but this will likely come later in 2023 when the full effect of rate rises has passed through.”
  • U.S. CPI data (due Tuesday, NY Time) will be key for the short-term outlook of market pricing re: global monetary policy settings.

Fig. 1: RBA-Dated OIS Strip

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Fallout from the SVB collapse leaves the RBA-dated OIS strip calling time on the RBA’s rate hiking cycle, with 1-2bp of easing now priced for next month’s central bank gathering, while a 25bp cut is now essentially fully priced for the Bank’s December meeting (RBA-dated OIS covering meetings from August currently all price more than a 50% chance of such a step).

  • A softer NAB business confidence reading (moving into negative territory) will do nothing to push back against this pricing, given that the RBA included it on the list of must-watch data re: monetary policy assessment. The survey collator noted that “while we expect inflation likely peaked in Q4, price growth remains elevated and the survey suggests that while global goods-side pressures have abated somewhat, there has been less evidence of easing in services-side pressures. NAB continues to expect a more material slowdown in demand, but this will likely come later in 2023 when the full effect of rate rises has passed through.”
  • U.S. CPI data (due Tuesday, NY Time) will be key for the short-term outlook of market pricing re: global monetary policy settings.

Fig. 1: RBA-Dated OIS Strip

Keep reading...Show less