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4 Mar 2015
Australian rates could tumble by 75bps – Rabobank
FXStreet (Barcelona) - Michael Every of Rabobank, notes that with AUD gaining due to Australian yields being high in relative terms, the RBA might be compelled to cut rates by 75bps.
Key Quotes
“True, nominal rates are at a record low and in real terms yields are close to negative out to four years on the curve; but in relative terms Aussie rates are still high – and many other global markets are seeing negative nominal, not real, yields.”
“That backdrop remains a magnet that draws capital to AUD; and that is something the RBA has already finally admitted needs to be reversed before the economy can rebalance.”
“In March it again noted that AUD is too strong on a trade-weighted basis: [..] the Bank has a lot more to do yet on rates if that is their new goal.”
“In short, the RBA needs to be far more proactive – and rates could tumble 75bps from here quite easily in my view – in order to push bond yields lower, and so win this round of the global currency war”
Key Quotes
“True, nominal rates are at a record low and in real terms yields are close to negative out to four years on the curve; but in relative terms Aussie rates are still high – and many other global markets are seeing negative nominal, not real, yields.”
“That backdrop remains a magnet that draws capital to AUD; and that is something the RBA has already finally admitted needs to be reversed before the economy can rebalance.”
“In March it again noted that AUD is too strong on a trade-weighted basis: [..] the Bank has a lot more to do yet on rates if that is their new goal.”
“In short, the RBA needs to be far more proactive – and rates could tumble 75bps from here quite easily in my view – in order to push bond yields lower, and so win this round of the global currency war”