The bulls have full control of Australian interest rate markets with Australian Government 10-year bond trading down to a fresh all-time low below 2.5%.
That’s on the back of moves overnight in global markets which saw some solid rallies in US and other 10-year bonds as investors continue to downgrade growth, inflation and interest rate expectations across multiple jurisdictions.
But as the RBNZ showed this morning, and as the RBA is increasingly expected to signal either with next week’s Governor’s statement, Quarterly Statement on Monetary Policy, or both, growth and inflation are skewed to the downside here in Australia as well.
So traders along the entire yield curve in Australia are taking rates lower.
Michael McCarthy, Chief Market Strategist at CMC Markets, told Business Insider that over the past week, “the curve overall has shifted downward, but the front end is a lot choppier. 30-day IR futures sold off 6-9 bps after yesterday’s higher than expected CPI read, but have rallied 6 bps this morning following the report from McCrann, who in the past has made uncannily prescient calls on future RBA moves.”
Indeed 90-day bank bill futures for September and December are this morning trading at 97.74 and 97.75 respectively. That implies a 90-day rate of around 2.25% (100-97.75) later this year which, given the usual shape of the curve implies traders have at least one RBA cut price in and are a long way toward a second cut.
We’ll hear more from the RBA next week. but for now the Bulls have it.