VIEW: BofA: RBA Shift To Flexible Bond Buying And Data-Dependent Tapering

Bank of America note "the RBA will update policy guidance at the 6 July Board meeting. Governor Lowe will hold a press conference, as was the case when yield curve control was unveiled last March and quantitative easing (QE) was introduced in November. So this is a formal change of direction. It seems almost certain the 3-Year yield target will not be extended beyond Apr-2024, but the RBA now looks likely to adopt a more flexible and data-dependent approach to extending QE. This would keep cross-market rate differentials narrow, manage market dislocations and avert an unwelcome appreciation of the currency."

• "Considerable stimulus will likely remain in place. A more open-ended third round to QE is more likely to commence at the current pace of A$5bn per week where RBA purchases would reach A$60bn after 3 months. An extension of QE would help to keep net ACGB supply negative in the new fiscal year and help to temper 10-Year swap spread tightening."