Reserve Bank leaks like a sieve

[skc]

A conclusion which surprises me. Last paragraph...

It doesn't seem like bottom of the cycle stuff.

I concur. I think the market is over reacting and is trading like we will have a rate rise next meeting.

Glenn Stephens might clarify things a bit in his next speech somewhere... seeing the $AUD soar is definitely not the intent of the RBA. And even if they don't have a easing bias, they should at least pretend to have one to keep the $AUD down.

Look at the rate hike talk in US... it's like getting a loan back from a bum. He said he will pay you back next week, but then next week came and he had to pay rent. He said he will pay you back next month, then next month came and his car had a flat tyre... it keeps being push back while Yellen maintains lip service to a hike. Meanwhile, the US market is still hugging all time highs.

 

[banco]

It still has 8 cuts untill it reaches 0.
Current 2% is way too high if compared to the US and EZ.

I just wonder when they throwover the idea of budget surplus and start QE instead, but one way or another we get there.

Isn't Australia more constrained than the US and EZ given our different situations? ie Australia's reliance on overseas money?

 

[McLovin]

Look at the rate hike talk in US... it's like getting a loan back from a bum. He said he will pay you back next week, but then next week came and he had to pay rent. He said he will pay you back next month, then next month came and his car had a flat tyre... it keeps being push back while Yellen maintains lip service to a hike. Meanwhile, the US market is still hugging all time highs.

We're in the twilight zone I think.

Could you have imagined this 10 years ago?

Mexico sold the world’s first 100-year government notes in euros and its third so-called century bond as the nation seeks to lock in lower borrowing costs amid the European Central Bank’s unprecedented stimulus.

The country offered 1.5 billion euros ($1.62 billion) of debt due in March 2115 with a 4.2 percent yield to maturity, according to a statement from the Finance Ministry. Yields on Mexico’s 30-year euro bonds sold in February have fallen 0.32 percentage points since the debt started trading to 2.77 percent as of 3:22 p.m. in New York.

Err...Mexico! 100 years! 4.2%!

Debt defaults...

Mexico (1827, 1833, 1844, 1850,[18] 1866, 1898, 1914, 1928-1930s, 1982)

It's basically Greece with tacos.

Strange times.

 

[skc]

We're in the twilight zone I think.

Could you have imagined this 10 years ago?

Err...Mexico! 100 years! 4.2%!

Debt defaults...

It's basically Greece with tacos.

Strange times.

Lol. I wish I could lock in a 100 year bond for negative 0.5% interest. Any takers?

Definitely very strange times. Well, apparently the Islam considers charging any interest for loan as sinful and an act of usury. We must be all heading that direction...

May be that's the evolution of modern finance... the concept of risk free rate is now changed forever. Risk free rate should be zero. No risk, no return. Simple as that. I can't believe we didn't think of it 200 years ago. Think about how many ghost cities on Mars we could have built with all those free money.

 

[DeepState]

Any takers?

Banco Centrale de SKC

 

[skc]

I concur. I think the market is over reacting and is trading like we will have a rate rise next meeting.

Glenn Stephens might clarify things a bit in his next speech somewhere... seeing the $AUD soar is definitely not the intent of the RBA. And even if they don't have a easing bias, they should at least pretend to have one to keep the $AUD down.

Ok... found this article discussing the last paragraph of the RBA meeting statements.
http://www.sharecafe.com.au/sharecafe.asp?a=AV&ai=34572

Here's the one in April... no cut.

"At today's meeting the Board judged that it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will continue to assess the case for such action at forthcoming meetings.”

Here's the one yesterday for May... 25bps cut.

At today’s meeting, the Board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand.

Here's the one in Feb... 25bps cut. http://www.rba.gov.au/media-releases/2015/mr-15-01.html

At today's meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate. This action is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target.

To me the Feb and May statements don't read that differently. The "further easing may be appropriate" line is only used in the month when the rate is held steady. The RBA is always about assessing the available data and making a decision... that's why they meet monthly to make a decision. They don't make a decision on 2 rate cuts in one meeting.

So.... I think the market got it wrong. Let's see.

 

[banco]

To me the Feb and May statements don't read that differently. The "further easing may be appropriate" line is only used in the month when the rate is held steady. The RBA is always about assessing the available data and making a decision... that's why they meet monthly to make a decision. They don't make a decision on 2 rate cuts in one meeting.

So.... I think the market got it wrong. Let's see.

I agree the language itself isn't different but the context is (ie we are now at lowest rates ever).

 

[McLovin]

Ok... found this article discussing the last paragraph of the RBA meeting statements.
http://www.sharecafe.com.au/sharecafe.asp?a=AV&ai=34572

I don't know if these guys read a different announcement to me or its a case of following the herd and explaining the market reaction rather than explaining the announcement.

This...

The economy is therefore likely to be operating with a degree of spare capacity for some time yet. Inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate."

And this...

At today’s meeting, the Board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand

= Rate cuts are over.

To me the Feb and May statements don't read that differently. The "further easing may be appropriate" line is only used in the month when the rate is held steady. The RBA is always about assessing the available data and making a decision... that's why they meet monthly to make a decision. They don't make a decision on 2 rate cuts in one meeting.

So.... I think the market got it wrong. Let's see.

I'm glad to see I'm not the only one.

 

[sptrawler]

It still has 8 cuts untill it reaches 0.
Current 2% is way too high if compared to the US and EZ.

I just wonder when they throwover the idea of budget surplus and start QE instead, but one way or another we get there.

Well if that happens, the last thing you would want to do, is bail out of the share market.

 

[DeepState]

The FX moves and bond moves were likely driven by global matters much more so than the RBA decision. The RBA announcement likely had very little influence on CAD which has been moving in lock-step with AUD. Further, I doubt it moved UK, GER yields up sharply as well with all major market yields up that day.

This is a major carry unwind going on. Something has been happening since 14 April.

 

[qldfrog]

The FX moves and bond moves were likely driven by global matters much more so than the RBA decision. The RBA announcement likely had very little influence on CAD which has been moving in lock-step with AUD. Further, I doubt it moved UK, GER yields up sharply as well with all major market yields up that day.

This is a major carry unwind going on. Something has been happening since 14 April.

So is it the time to load in USD, or even Euro??
The AUD is back to 80c (in USd) and this is the telltale sign for me to buy O/S currencies
I concur with you, the fact that the interest rate is the lowest ever has no real significance as there is still much room to go: 2 points more-> at least 8 easings on rates and i would bet the last ones would be by smaller de-crements.
I do not agree/validate the policy but better go with the flow.So how can I use it
Just edgy with the stockmarket, especially in Oz