RBA Overnight Cash Rate Sets Higher, Tsy Sec. Kennedy Sounds Hawkish

Some relatively hawkish speak from the Australian policymaking sphere, coupled with weakness in U.S. Tsys, has seemingly applied pressure to the Aussie FI space in early Sydney trade.

• Australian Treasury Sec Kennedy (who also sits on the RBA board), noted that inflation risks are on the upside, while stressing that an orderly movement of fiscal/monetary policy to maintain low unemployment will be pivotal. He went on to note that there is an opportunity for monetary policy to “normalise,” while tipping his hat to risks that wage growth may exceed forecasts (notable wage growth is the need that the RBA constantly refers to when it comes to outlining its views on the path of policy).
• YM trades -6.5, 8.0 ticks off lows, while XM is -0.5, 4.0 ticks off its own low, after some sharp moves.
• Bills are 2-5 ticks lower through the reds, 5-11 ticks off worst levels.
• Also note that the effective interbank overnight cash rate set at 0.09%, 1bp off the RBA’s 10bp target, after setting at 5bp and below since Nov ’20. This would have provided further pressure for the space.