Australian interest rates

Last week’s national accounts release for the December quarter revealed that Australian households accumulated a record $187 billion of savings in calendar year 2020 as they cut back spending (due to COVID restrictions) and banked enormous amounts of stimulus.

I have been musing on the likelihood of a new taper tantrum for months.

As we know, the RBA is on record saying that it won’t raise interest rates before 2024 and that it is quite happy for house prices to rise for the economy to enjoy the economic spillovers.

As expected, the Reserve Bank of Australia (RBA) held the cash rate steady at 0.10% today and reaffirmed the parameters of the Term Funding Facility (TFF) and bond purchase program.

A fash note from Kieran Davies at Coolabah Capital: After defending its 3-year bond yield target last week, this morning the RBA doubled its QE purchases of Commonwealth bonds.

The RBA meets tomorrow amid some serious bond market and yield turbulence.

What next for bond and stock market crashes?

We noted this week that mortgage applications are now so hot that banks are unable to keep up and approval times are blowing out spectacularly.

What a business cycle this is.

More interesting ruminations from a slightly less bullish Goldman Sachs on how to hedge inflation.

Markets are today busily repricing the prospects for interest rate rises around the world.

Via the FOMC: Despite a sharp spike in unemployment since March 2020, aggregate wage growth has accelerated.

I noted earlier that the US inflation panic is likely to drive yields higher yet.

From the always worthwhile George Tharenou at UBS: We expect the RBA to tweak its QE operations At their meeting in February, the RBA extended QE and told markets they will continue to buy $5bn/week of bonds until September.

Fresh from the central bank: Christopher Kent, Assistant Governor (Financial Markets) Introduction Today I will discuss some recent developments in the foreign exchange market, and provide some views on the role of the Reserve Bank’s various policy measures.

Will the RBA upsize QE at ay time?

As we know, the world enjoyed an unprecedented K-shaped recovery last year as goods boomed via stimulus and work from home.

The RBA has never directly acknowledged a single asset bubble that I can recall.

Via Banking Day: Greater Bank has set a new benchmark in the mortgage market, cutting its one-year fixed rate by 20 basis points to 1.69 per cent.

As real interest rates fall and fall, at first via central bank interest rate cuts then via rising inflation meeting central bank’s refusing to hike, cash gets less and less attractive.

For many years Australia has dragged the chin on unconventional monetary policy.

With a short term inflation spike about to land on markets BofA takes a look at the critical bond yield levels that would upset stocks: No more TINA The long-standing bullish mantra for stocks has been “There is no alternative” or TINA.