Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Saturday, 6 December 2014

Cash Rate Futures Capitulate - Stand by for Interest Rate Cuts

We've been making the point for some months that although surveyed economists and futures markets did not agree, the labour force figures and a range of other data across our chart packs looked so suspiciously weak that in spite of the evident wishes of the Reserve Bank interest rates may eventually have to be cut, although this could clearly take a while to play out. 

It has taken a little while but a glance at the Friday market action of determined prices in respect of 30 Day Interbank Cash Rate Futures shows that the sentiment has shifted markedly in favour of a further cut in this easing cycle.

The February 2015 contract was trading at 97.58 resulting in an implied yield of 2.42 percent and suggesting a 36 percent chance of a rate cut as soon as the next RBA Board Meeting in February.

Much can happen between now and February of course, especially within commodities markets (which have been one of the key catalysts for the shifts in sentiment) but if I was a betting man I'd look at a March cut, and perhaps even two cuts before the end of Q2 2015.

This would give the Reserve Bank a month to signal its intentions and to remove the "period of stability" line from its monetary policy decision release.

Plotting the chart of implied yields from market determined prices across a range of contract expiry months shows just how much sentiment has shifted since the first week of October, with the implied yield curve now once again taking on a markedly inverted shape.

The market determined price of October contracts was trading at just 97.81 implying a yield of 2.19 percent on Friday.

In short, the cash rate looks to be heading towards 2 percent.