Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 22 January 2015

Falling Rates ("Double-Tap"?)

BoC goes again

The Bank of Canada (BoC) shocked markets by chopping its overnight lending rate today by a quarter of a percent to just 0.75 percent.

Canada's overnight rate had been stuck at 1 percent since September 2010, but oil prices plummeting in half clearly helped to precipitate a shift in policy stance.

RBA to follow suit?

It has certainly taken Aussie markets a long time to come around, but it seems we're getting close to being on the same page now with markets expecting the official cash rate to fall to just 2 percent and appearing likely to stay there until the second half of 2016.

While a rate cut as soon as February is still only considered to be around a 1-in-3 shot, the odds are increasing with each trading day that passes, with soft Q4 2014 inflation data perhaps expected on January 28 to help the rate cut cause.

ASX 30 day interbank cash rate futures February contracts are trading at 97.57, implying a yield of 2.43 percent and indicating a 31 percent expectation of a cut on February 3.

Regardless of whether rates are cut as soon as February, it seems that markets are envisaging a cut in the next few months as almost a "sure thing", with three of the four major banks calling for cuts now too.

The cash rate futures implied yield curve has taken on a markedly different shape in recent months.

It looks as though we may be heading down, which would obviously be a significant boon to property markets.