Curve Daily Commentary, May 4, 2015

RBA Just The Tip Of The Iceberg This Week

The RBA’s rate decision at 2:30pm tomorrow will be top billing this week, especially after Peter Martin’s article all but saying it was a done deal last Thursday night. Market pricing now has the probability of a rate cut at 2:3 after being less that 50/50 prior to his article.

Interestingly 3 and 10 year futures have been far less fazed. The 3 year has remained steady with the yield still hovering just under 2% while the 10 year has continued to sell off, driving the yield as high as 2.70%. This type of price action is synonymous with the bottom of the cycle and generally occurs ahead of, or just after, the last move.
Leaning Towards a Cut

The recent signs of improvement in a number of key data releases has been the main driver behind this type of price action. That then brings as to the treasure trove of data that lies ahead this week.

The key data releases that we will get in and around the RBA’s decision includes the TD Securities monthly inflation gauge, ANZ Job Ads and building approvals all out today. These will be followed by the weekly consumer sentiment index and trade balance before the RBA tomorrow. Retail sales, including the monthly inflation adjusted data will then be out Wednesday followed by the all important employment statistics on Thursday.

It all adds up to be a huge week before the government steps up to deliver the budget next week.