VIEW: TD Securities Tweaks RBA Call Re: Yield Curve Targeting

TD Securities note that "the RBA reiterated its dovish stance in the Oct statement that it does not expect to hike the cash rate before 2024. However, OIS is now priced for the RBA to hike in Jul/Aug '22. Markets seriously doubt the RBA's ability to keep rates on hold before '24. The Q3 NZ CPI print blitzed the RBNZ's expectations, raising the odds of a 50bps move at next month's meeting. Australian rates subsequently came under more pressure."

• "The RBA Minutes should not surprise. Instead, more focus will be on the Governor's panel participation on "Central Bank Independence, Mandates and Policies" on Thursday/Friday. The market is likely to test RBA's commitment to defend the ACGB Apr '24 10bp yield target. The next scheduled RBA ACGB purchase date is Thursday, but we don't anticipate the RBA to step in then or before the RBA's November meeting. This implies higher front-end yields."
• "We expect the RBA to announce ACGB Apr '23 as the new target bond at next month's Board meeting. This is earlier than we had anticipated, but it remains consistent with our current RBA call for the Bank to begin hiking in May '23."