VIEW: NAB: Market Looking For More Colour On Bond Purchases

NAB note that "the market will be looking for guidance from the RBA today on its QE program following yesterday's increased bond purchases but also possibly more colour on YCC given the re-pricing in ACGB Nov '24 in the past few weeks. NAB's view is that the RBA will not roll its YCC target to ACGB Nov '24, we see fair value (currently) on ACGB Nov '24 (if it is not a YCC bond) at around 0.30%. The bond closed yesterday at 0.335% (having peaked at 0.45% last week). In an environment where bond markets consolidate and the RBA waits till June/July to announce its intentions on YCC we would expect ACGB Nov '24 to settle at around 0.25-0.30%. Following last week's YCC purchases the RBA now owns 60% of ACGB Apr '24. The next largest bond holding for the RBA is ACGB Nov '28 at 40% of outstandings and then ACGB Apr '23 at 39%. As we highlighted last year, the market will test the RBA's Yield Curve Control Target this year should data continue to point to a recovery. This will see the RBA have to work harder at keeping yields near the 0.10% target - as was seen last week."