Slightly Cheaper After RBA Policy Decision

ACGBs (YM -24.0 & XM -16.0) have slightly extended today's cheapening after the RBA decided to leave the cash rate target unchanged at 4.35%. To summarise the accompanying statement:

• Inflation has significantly decreased since its 2022 peak, due to higher interest rates balancing aggregate demand and supply.
• However, it remains above the 2–3% target range, with underlying CPI rising by 3.9% over the year to June. Inflation has been persistent, staying above the midpoint for 11 consecutive quarters.
• Risks include high unit labour costs and weak economic activity.
• The RBA prioritises returning inflation to target and will adjust policy as needed, considering global and domestic economic trends.
• Cash US tsys are 4-6bps cheaper in today’s Asia-Pac session.
• Cash ACGBs are 1-3bps cheaper after the RBA decision, with the AU-US 10-year yield differential at +15bps.
• Swap rates are 14-25bps higher on the day, with the 3s10s curve flatter.
• The bills strip has bear-steepened, with pricing -13 to -26.
• RBA-dated OIS pricing is 4-7bps firmer after the RBA decision across meetings. A cumulative 27bps of easing is priced by year-end.
• Tomorrow, the local calendar will see RBA Hunter, Assistant Governor (Economic), and RBA Cassidy, Deputy Head, Economic Analysis appear before the Senate Select Committee on the Cost of Living.
• Tomorrow, the AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond.