VIEW: RBC writes "it seems that AU's foray......>

RBA: VIEW: RBC writes "it seems that AU's foray into unconventional MonPol will

begin with YCC... We can see merit in targeting 10-Year yields, which will then

effectively anchor much of the curve below that level. However, targeting 5-Year

yields would deliver YCC that is more tailored to Australian circumstances, with

the majority of mortgage and business lending at this tenor or below. Another

advantage of targeting the 5-Year yield is that it is less influenced by global

factors... Whatever the target yield is, we would expect some flexibility with a

likely cap adopted. In practice, this could mean a 5-Year yield target of +25bp

to cash with a cap of a further 10-20bp. This would differ from the Japanese

experience, which uses a symmetrical range (currently around zero +/-20bp).

Further details are likely to emerge at the April meeting... The RBA will need

to provide reassurance that it has other tools despite the depletion of

traditional ammunition and even if unconventional measures are further down the

track. However, there must be some risk that YCC is adopted at the April meeting

to begin shortly thereafter, especially if global central banks deliver as much

stimulus as is currently priced."