Daily Commentary BY THE CURVE TEAM –

Daily Insights – Fallout From Inflation Continues

29th of October, 2021

Yield Curve Target Threatened

  • The April 2024 government bond was trading above 0.50% yesterday, well above the RBA’s 0.10% target.
  • Next Tuesday’s meeting will be significant, as it will clarify whether the RBA plan to defend the target or remove it in light of the market moves.
  • Already the RBA’s expectation that the cash rate will be on hold until 2024 is definitively disbelieved by markets, with a rise to 0.25% priced in by June.

Fallout From Inflation Continues

  • Yields continued to edge higher yesterday.
  • There was also significant volatility. For example the 2 year swap gyrated over 10 points towards the end of the day, which could be a sign of illiquidity.
  • As of writing it is 1.09% but was over 1.20% at stages yesterday.

T Note Yields Jump

  • The February 2022 maturity had a lowest yield of 0% and highest of 0.03%.
  • The April 2022 had a lowest yield of 0.03% and highest of 0.10%.

Josh Stewart

Associate - Money Markets