Wednesday, 17 April, 2019
AUS rates- Debelle headline today in Sydney the trigger for a repricing of the very front of the RBA strip. This use of the word “months” was construed as RBA having a more patient stance on future direction than anticipated. We also had some solid WPC consumer conf data which would also please the CB given recent focus on wealth effects. Flows so far have reflected more hawkish opinions with new selling seen in YM in good clips bear flattening the curve. Will be watching closely for stops out of longs from here given the crowded nature of AUS front end, particularly in the whites with plenty of new buying in anticipation of tighter fra/ois in U9 and Z9 after the minutes. Flattening of YMXM has provided some much needed respite for short positions with recent TY softness and post budget steepening the cause for some discomfort. Expect to see good profit taking interest from 47 if we can get there.
If you are of the opinion that next weeks unemployment data and the following weeks CPI print can still break the RBAs back than perhaps its time to put a bid in to May IBs @ 52. With the meeting not till the 7th (settlement on cut @ 98.6935) there is still 13% chance of a cut priced so there is still room to come in a little. I would expect 52 to be well support given there will likely be some large 3m OIS receiving needs from the balance sheets ahead of such crucial data to protect their variable mortgage books.
RBA’S DEBELLE: HOW TENSION RESOLVES IN COMING MONTHS WILL BE IMPORTANT FOR FUTURE PATH OF RATES