Richer After RBA Keeps Cash Rate Unchanged

ACGBs (YM +8.0 & XM +8.0) sit at session highs after the RBA leaves the cash rate unchanged at 4.1% for the second consecutive month. ACGB futures are 6-8bp higher after the announcement.

• In brief, the Decision statement noted that inflation remains high at 6%, with services prices rising while goods inflation eased. The Board's priority is to return inflation to the 2-3% target range. Despite uncertainties, recent data indicate inflation may return to target, but household consumption faces ongoing challenges. Further tightening of monetary policy may be needed, depending on data and risk assessment. The Board will closely monitor global developments, household spending, inflation, and the labour market to achieve its inflation target.
• Cash ACGBs are 5-7bp richer after the decision with the 3/10 curve steeper and the AU-US 10-year yield differential -5bp at +2bp.
• Swap rates are 5-8bp lower after the data with the 3s10s curve also steeper.
• The bills strip has bull flattened with pricing +6 to +13.
• RBA-dated OIS pricing is 10-12bp softer for meetings beyond August after the decision with mid’24 leading. The market had attached a 35% chance of a 25bp hike at today's meeting.
• Tomorrow the local calendar sees no data.
• Tomorrow also sees the AOFM sell A$700mn of 3.75% 21 May 2034.