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Unchanged After SoMP Release

AUSSIE BONDS

ACGBs (YM -5.0 & XM -7.0) are unchanged after the RBA released updated forecasts in the latest Statement on Monetary Policy (SoMP). The forecasts show a slight downward revision to its estimates for economic growth (1.2% y/y to 0.9% y/y in 2023) and inflation returning to within its 2-3% target band at the end of 2025. In May, the RBA predicted inflation will hit 3% by mid-2025 but that has now edged up to 3.1%. RBA forecasts. (See link)

  • The forecasts are conditioned on a path for the cash rate broadly in line with expectations derived from surveys of professional economists and financial market pricing. The cash rate is assumed to peak at around 4¼ per cent before declining to around 3¼ per cent by the end of 2025.
  • Cash ACGBs are 5-7bp cheaper on the day with the AU-US 10-year yield differential +6bp at +2bp.
  • Swap rates are 3-5bp higher on the day with the 3s10s curve steeper.
  • The bills strip has bear flattened with pricing flat to -5.
  • RBA-dated OIS pricing is 1bp firmer across meetings after the SoMP release.
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