May 02, 2023 04:50 GMT
Sharply Cheaper after RBA Surprises With A 25bp Hike
ACGBs sit sharply lower (YM -21.0 & XM -12.5), after the RBA surprises the market with a 25bp rate hike. Moreover, in the final paragraph of the decision statement, the RBA noted that “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe…”.
- Market pricing had supported BBG consensus of no change outcome with only a 14% chance of a 25bp rate hike priced. At the time of writing, 3-year and 10-year futures were as much as 22bp and 14bp lower respectively.
- RBA dated OIS has shunted 22-32bp higher across meetings.
- Cash ACGBs are 11-18bp higher after the decision with the AU-US 10-year yield differential +10bp at -8bp.
- Swap rates are 12-19bp after the decision with the 3s10s curve 7bp flatter.
- The bills strip bear flattens with pricing -25 to -13 after the decision.