The Australian bond market had been trading heavily following the improved risk appetite and overnight lead from the US with the move towards higher yields, explains David Goodman, Research Analyst at Westpac.
Key Quotes
“The opening and concluding paragraphs of today’s statement were unchanged, suggesting an unchanged outlook and thus policy stance and thus the statement didn’t elicit a strong move, with the market reacting to the earlier data releases and the indications of a stronger GDP print tomorrow.”
“However, of most significance was the inclusion of a new comment that – “While there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline.”
“We read that as a pretty significant retort for those contemplating a cut to offset current tightening in credit conditions due to macroprudential tightening and RC.”
“With the Bank still expecting growth to “to average a bit above 3 per cent in 2018 and 2019″ and the first hike not priced until October 2019, we believe risk-rewards are skewed towards a bearish repricing on a stronger GDP outcome tomorrow.”
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