RBA: No strong reaction in Australian bond yields - Westpac

Australian bond yields didn’t react strongly to today’s statement, yields moving a basis point or two higher, with the decision fully discounted by the market, notes David Goodman, Research Analyst at Westpac.

Key Quotes

“Perhaps of most interest is the commentary around funding markets.”

“They note that “money-market interest rates are higher than they were at the start of the year, although they have declined somewhat since the end of June.”

“Much has been made of the fact that this is the 2 year anniversary of rates being on hold. While that is noteworthy, of more interest to us is the fact it has been almost 8 years since the Bank last raised rates, and on our current forecasts this is set to extend to a decade without the economy assessed as warranting a hike. This has seen a multi-year compression in AU-US spreads, and with today’s statement supporting a further period of unchanged policy contrasting with more upbeat FOMC, this trend could have further to go yet.”