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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

The upcoming week is very much about the RBA. Not only do we have the first monthly Board meeting for 2018, but we also get the RBA’s quarterly forecast update in its statement on monetary policy statement on Friday and the RBA Governor is giving a speech on Thursday. All of which will provide the RBA with an opportunity to provide the market with an update of its views. The general consensus is that rates are on hold but the RBA’s commentary is likely to be more upbeat after recent data both here and offshore.

Without going too deeply into the world of Treasury and trying not to be too technical I thought I’d provide a bit of colour this week on what has happened to longer term interest rates over the last two months.

The 10-year bond future yield traded between 2.62% and 2.90% in January (a range of 28bps vs 24bps in December) closing the month at 2.82%, 16bps higher and this is on top of the 17bps rise in December. Similarly, the 3-year bond future yield traded between 2.10% and 2.31% but ended the month at 2.20%, up 14bps in January and after a 24bps rise in December.

Australian Interest Rate

The higher yield environment has persisted for two months now, supported by recent economic data releases, stronger commodity prices (oil hit a two year high) and central bank commentary / action. The market sentiment has changed and is currently pricing in over two and a half rate hikes by the US Federal Reserve this year but following last week’s CPI and weak building approvals data, there is less than one RBA rate hike priced in by the end of the year.

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Source: Rural Bank


Disclaimer: Whilst all care has been taken in compiling the information, the information should not be relied upon as substitute for professional advice where necessary. Rural Bank Limited accepts no responsibility for the accuracy, completeness or timeliness of the information and disclaims all liability in relation to any loss or damage suffered by the use of or reliance upon any information contained herein or in any attachment or annexure hereto by any person. Rural Bank - A Division of Bendigo and Adelaid Bank ABN 11 068 049 178 AFSL/Australian Credit Licence 237879.