The main takeaway from the RBA is that they are not wanting to raise interest rates sooner than 2024. The RBA were explicit in this by saying that they do not share the market expectations of rate increases in 2022 and 2023. The RBA added that the board will consider the case for extending bond purchases later in the year.

Move on the 3-year yields

The RBA had a repo tweak last week that some may have missed. In a nutshell, they have announced that the borrowing of the 04/2023 and 04/2024 bonds will be done by their own facility. The kicker here is that their facility jas a fee of 100bps vs the usual 25bps fee. The prospect of shorting these 3-year yields bonds, to much rates above 0.10%, looks very unlikely.

Not before the Fed

Despite the threat of further bond purchases potentially coming Governor Lowe said that the RBA is already doing a large amount of QE and it is ‘sensible to see how the economy develops’ before deciding on further QE. The way to read the RBA is still that they don’t want to move before the Fed. Governor Lowe’s speech just puts more focus on the Fed’s meeting this week. If the Fed starts talking about earlier rate rises than the RBA will likely start to follow suit. They just don’t want to be the first to declare a coming rate rise.


Although Governor Orr is trying to signal stimulatory policy investors have been giving a 29% chance of the RBNZ hiking rates this year. This percentage can grow as NZ has already purchased enough vaccines for the whole country and Q4 GDP data out this week may signal the economy is on a sure footing. This should open up an AUDNZD sell bias, but keep an eye on the bond yield spread.