Slightly Richer, July Decision Not Finely Balanced (RBA Minutes)

ACGBs are dealing slightly higher (YM +3.0 & XM +1.0) after the release of the RBA Minutes for the July meeting.

• The Board discussed both a 25bp hike and a pause but decided that the arguments for the latter were “stronger”. This time it appears that the decision was not “finely balanced”.
• The minutes indicated that the cycle may not yet be over and that decisions remain very data dependent, as growth concerns seem to have increased. Q2 CPI is due on July 26 and staff forecasts are likely to be key components in the August 1 outcome.
• Cash ACGBs are 1-3bp richer with the AU-US 10-year yield differential at +17bp.
• Swap rates are 2-3bp lower with the 3s10s curve steeper.
• Bills pricing is +2 to +4.
• RBA dated OIS pricing 1-5bp softer across meetings.
• Tomorrow the local calendar sees Westpac -MI Leading Index.
• Commodity prices declined on Monday after China’s economy grew slower than expected in the second quarter, adding to concern about the lacklustre recovery for Australia’s largest export partner. Fund managers say the big concern for the market is whether authorities will step in and announce more meaningful economic stimulus. (See link)
• Tomorrow the AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond.