RBA Places Chips On Cup Day

Aussie swaps have widened vs. the ACGB space on the back of the RBA decision, with the more aggressive than consensus 5-10 Year bond purchase horizon (6 months vs. 12-month consensus) frontloading the RBA's purer take on QE, alongside an in line with consensus purchase war chest of A$100bn, forward guidance tweak pointing to lower for longer settings at the RBA (after the expected 15bp cuts to the cash rate target, 3-Year ACGB yield target and rate applied to the TFF facility) and openness to doing more, if required, at the fore (Governor Lowe's press conference highlighted that any further easing would likely focus on the bond side of the equation, as opposed to interest rates, with the Bank still against the idea of -ve rates).

• YM +2.0 and XM +5.0 at the Sydney close, as the latter finished shy of reaction highs, and the curve settled curve flatter vs. pre-decision levels.
• Bills also firmed & closed 2-3 ticks higher through the reds. The IRH1 contract printed as high as 100.01, i.e. in negative BBSW territory. This was aided by the interest rate being paid on E/S surplus balances lodged at the RBA being set at 0.00% (given the recent relationship between this rate and BBSW fixings), which only a few pointed to as their base case ahead of the decision (most looked for 0.01% or 0.05%). A reminder that RBA Assistant Governor Kent recently noted that it wouldn't be surprising to see the BBSW fixing slip into negative territory.