RBA hits back at hawkish market with $ 1 billion bond blow

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The move surprised some analysts because it happened on Friday, a day when the Reserve Bank does not usually hold such auctions.

Bond bureaus have been agitated following a rout in global markets and rising expectations that the central bank will raise its cash rate well before 2024 to cope with rising inflation.

The last central bank auction under its control of the yield curve was on February 26, when it bought bond lines for $ 3 billion from April 2023 to April 2024. The same week, it bought a total of $ 7 billion.

The Reserve Bank has repeatedly said it is unlikely to hike rates until 2024 as wage growth and inflation remain sluggish. This timeline has been aggressively challenged and the futures markets price the first rate hike in June 2022, the second in September, and a third in December.

Even so, the vast majority of economists do not agree that the central bank will raise its key rate as early as next year. However, some believe the concurrent $ 293 billion quantitative easing (QE) program may end soon.

“The markets are too complacent about QE,” said George Tharenou, chief economist at UBS, predicting that the Reserve Bank would prepare investors for a quick end to the program. “We see a risk that the bank will opt for an earlier abrupt halt to QE at the February policy meeting.”

Mr Tharenou said the RBA might feel uncomfortable, by then, owning more than 35% of all government bonds, especially if other central banks have cut or stopped trading. ‘buy bonds completely. UBS expects the Reserve Bank to halve February buybacks to $ 2 billion a week and stop buying in May.


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