- A BBB+ name attracted considerable flow for 6 month TDs with an offering of 4.80%.
- NCD activity was steady with +40 for 3 months the current market level.
- Yesterdays unexpected 25 basis point hike by the RBA saw a recalibration of market expectations and heavy trading of Swap Rates and Live Bank Bills.
- Currently, 3 month and 6 month Live Bank Bills are trading at 3.88% and 4.04%. 1 year swap rates have climbed to 3.90%.
- With upward movements in reference rates, participants who may have missed out on 5% 1 year TDs could have a chance to lock it today.
RBA Surprises With Another Rate Hike
- The RBA caught the market, the majority for economists and market commentators off guard yesterday, lifting the cash rate a further 25bp to 3.85%.
- In the accompanying statement and subsequent speech last night, the governor highlighted that inflation, particularly in the services sector, and employment market strength are at odds with returning inflation back to the target band in a reasonable time frame.
- With the move being unexpected we saw an immediate shift up in rates across the yield curve , some of which has dissipated overnight overnight as US markets led the reversal
- As for the outlook, the RBA retained a tightening bias, not ruling out the potential for further increases in the cash rate in order to return inflation to the target band
- Current pricing suggests the market isn’t convinced that we will see another hike form the RBA
- We will learn a little more about the outlook when the RBA releases their quarterly statement on monetary policy this Friday