Slightly Richer After The RBA Holds Steady

ACGBs (YM -3.0 & XM -7.5) sit slightly richer after the RBA leaves the cash rate target at 4.10%, for the fourth straight month. The statement sounded a familiar refrain, despite the change at the helm from Phil Lowe to Michelle Bullock. To summarise the statement:

• High-interest rates aim to balance supply and demand but have uncertainties. Inflation, though past its peak, remains high, particularly in services and fuel prices.
• While the economy grew stronger than expected in the first half of the year, it remains below trend due to high inflation impacting real incomes.
• The RBA aims to bring inflation back to its 2-3% target range but acknowledges uncertainties, including persistent service price inflation. Further rate tightening may be needed, dependent on data and risks. The RBA remains committed to its goal.
• Cash ACGBs are 1-2bps richer after the RBA decision, with the AU-US 10-year yield differential at -12bps versus -10bps earlier.
• Swap rates are flat to 2bps lower after the decision and flat to 4bps higher on the day.
• The bills strip has twist-steepened, with pricing +2 to -4.
• RBA-dated OIS pricing is little changed after the RBA decision. The market had only attached a 12% chance of a 25bp hike priced for today. Terminal rate expectations continue to sit at 4.38%, the highest since late July.