Daily Flows & Commentary BY THE CURVE TEAM –

Daily Flow & Insights – Review on Yield Curve Control

Tuesday, June 21, 2022

Daily Flows

  • It was a relatively standard start to the week yesterday.
  • Reference rates continued to climb, with 3mBBSW climbing another 4bps to 1.84%. However, TD rates and NCD margins held steady.
  • It is perhaps possible that some investors have remained on the sidelines until the flurry of news and data due today is received.
  • Bond yields have remained attractive into the new week. We saw flows into Macquarie August 2024 and Feb 2025 FRNs, with yields peaking around +90 and +100 respectively.

RBA’s Review on Yield Curve Control

  • The RBA this morning released a review of their pandemic-era yield curve control policy.
  • The policy aimed to maintain low funding costs during the pandemic by implementing a low target yield on the 3-year Australian Government Bond.
  • The Bank’s internal review concluded that the policy was successful in supporting affordable credit to the market in a time of high uncertainty and possibly very bad outcomes, achieving its central goal.
  • However, the RBA admitted that the target was not well-suited to adapt to the faster than expected economic recovery, with a disorderly end to the target in late 2021 that resulted in bond market volatility and some dislocation in the market.
  • The Bank aims to better consider the full range of possible scenarios in future periods of high uncertainty, and plans to complete a review of the bond purchase program later in the year.

Lawrence Vosper

Business Analyst