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Sunday, 24 October 2021

RBA hammers yields lower

RBA hammers yields lower

Financial markets have been awash in recent weeks with commentators noting how the Reserve Bank of Australia can't do this, or shouldn't be doing that.

As it turned out, they could, and they did...for the time being at least.

For the first time since February, the RBA made $1 billion purchases in support of its 0.10 per cent 3-year yield target. 

Source: RBA

As explained by econo-king James Foster herethe cost of borrowing the April 2024 line was also lifted from 0.25 per cent to 1 per cent, making it considerably more expensive to short the bond and place upward pressure on its yield. 

Source: Bloomberg, via Anthony Doyle

Job done.

As the saying goes, never fight someone armed with a printing press.


In other news, preliminary auction clearance rates were still strong in Sydney and Melbourne, but with final clearance rates likely to be in the low-to-mid 70s the requirement for further regulatory intervention appears to be lessening, as listings and auction volumes increase. 

Source: Domain

A big week ahead for markets, with inflation figures due out on Wednesday, and the trimmed mean inflation figure expected to lift closer towards 2 per cent as auto fuel prices have increased in the third quarter of the calendar year.

Headline inflation will likely pull back towards around 3 per cent, on the base effect.