RBA

The RBA hikes again, and signals that the job isn’t done, it’s data dependent, and you should absolutely think about sticking c300bps atop 4.10% when contemplating 30-year financial obligations.

Now the initial reaction can often fade, so we don’t put tremendous stock in the below, for any given day, unless the magnitudes are so enormous that we can detect meaningful shifts in expectations.

Overall, clearly consistent with a negative monetary shock (yes, obviously, but still, have to do it) and we’d imagine, given the ongoing emphasis about data dependance, and the inflation shock earlier in the week, that 10s might attempt to move towards 4% again.

Our long run view is that 10s wind up back at 2.5-3%, not anything north of 4%, so we would regard that as good buying, but have been waiting for this last gasp of inflation, and requisite central bank hawkishness, to make that move.

We are going to need another scale for where consumer confidence bombs out.

Interestingly, reading market participant reactions, Zac Gross (economic lecturer down in Melbourne) who comments “the higher rates go today the sooner they fall”.

I think that take is correct, and that’s how the market is largely positioned, near term, hence the downward slope to the cash rate futures market, with the added extra of “and the tail-risk recession-risk pushes 10s down further”, which isn’t how the market is positioned.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.

Receive our investment insights

Something went wrong. Please check your entries and try again.