Slightly Richer After Minutes Release Despite Door Ajar For More Tightening

ACGBs (YM +3.0 & XM +6.0) are 2bps richer after the RBA Minutes for the November meeting stated that further tightening will depend on incoming data. That said, the Minutes did appear to leave the door ajar for another rate hike, stating that the forecasts for inflation assumed another 1-2 more rate rises and the risks around inflation not returning to target by 2025 had risen.

• The release of the November minutes followed RBA Governor Bullock’s appearance on a panel at the ASIC Annual Forum, where she stated that the biggest challenge facing the economy is inflation. She also pointed out that the current inflation problem is not just due to the supply side but that there are also underlying demand pressures, which the central bank is trying to contain. Her comments were consistent with expectations that rates are likely to stay “high for longer”.
• Cash ACGBs are 3-5bps richer on the day, and 1bp richer post-Minutes, with the AU-US 10-year yield differential unchanged at +5bps.
• Swap rates are 4-6bps lower on the day, with the 3s10s curve flatter.
• The bills strip has twist-flattened, with pricing -1 to +3.
• RBA-dated OIS pricing is flat to 2bps softer across meetings in post-Minutes dealings.