Slightly Cheaper Ahead Of RBA Policy Decision

ACGBs (YM -0.4 & XM -1.9) are slightly weaker ahead of today’s RBA Policy Decision.

• Overnight, US tsys cheapened 5-7bps across benchmarks amid a hefty corporate issuance calendar. An easing in French political uncertainty over the weekend also weighed.
• The RBA is expected to hold the cash rate for the fifth consecutive meeting. Governor Michele Bullock should stress flexible policy options, despite a recent inflation rise to 3.6%, and emphasize avoiding excessive short-term monetary adjustments, tolerating a slower return to the inflation target compared to international peers.
• There will not be updated forecasts, but a press conference will follow an hour after the statement is released. (see MNI RBA Preview here)
• Cash ACGBs are 1-2bps cheaper, with the AU-US 10-year yield differential at -15bps.
• Swap rates are slightly higher.
• The bills strip is slightly cheaper, with pricing -1 to -2.
• RBA-dated OIS pricing is little changed across meetings today. Market pricing has undergone a significant reassessment since the May RBA Policy Meeting.
• Currently, the market is pricing approximately 14bps of easing by year-end from an anticipated terminal rate of 4.34%. In the run-up to the RBA’s May Policy meeting, the market was pricing no easing by year-end from an anticipated terminal rate of 4.42%.