Westpac: RBA Messaging Unlikely To Change, That Won't Impact Bonds

Westpac note that "the recent bearish outright momentum and sentiment only accelerated on Monday, as the surprisingly strong New Zealand CPI fed through into a further shift in RBA policy expectations. August 2022 is now priced above 25bp and there are 2 rate hikes factored by November 2022. That re-pricing is also a reflection of shifting expectations for the Fed's tightening cycle as well. So, with global markets looking to factor-in an accelerated timetable for conventional rate hikes, one major question is whether RBA Governor Lowe will maintain his oft-stated view that the first move would not occur until 2024, or whether his attitude is beginning to shift."

• "We are reminded that it was only just over a month ago, on 14 September, that Dr Lowe made the comment that he found it "difficult to understand why rate rises are being priced in next year or early 2023" and warned that "while policy rates might be increased in other countries over this timeframe, our wage and inflation experience is quite different". So there is certainly a risk that the market gets re-priced by some more dovish commentary from the Bank in coming weeks. However, in our view that is perhaps worth a few basis points in the front STIR contracts but will have little effect further out the curve."