VIEW: TD Securities: What's The Market Gotten Wrong

TD Securities note that “despite the bulk of the market's attention centred on a more aggressive repricing of Fed hike expectations, U.S. Tsy curve inversion and moves in USD/JPY, it was Australian fixed income that actually underperformed the most in the last week.”

• “The rapid rise in AUD/JPY triggered an acceleration in Japan's fiscal year-end driven book squaring (selling bonds/paying swap) into an Australian market challenged for depth and liquidity. In turn, RBA rate hike expectations became totally unhinged.”
• “Our assessment is that supply-side issues are a significant problem for most central banks, but less so for the RBA. The RBA has time on its hands. We stick with August for the RBA's first hike.”