Australian interest rates

Via some very temporary factors, via Banking Day: Australia’s largest direct provider of lender’s mortgage insurance, Genworth, has recorded a sharp turnaround in first quarter profit after crystalizing monster gains on its investment portfolio.

Via Terry Mccrann: A rate cut at next Tuesday’s Reserve Bank meeting is possible but remains most unlikely.

This time via the excellent Damien Boey at Credit Suisse: It has been widely reported in the press that the RBA and APRA are considering cutting the interest rate applied to debt serviceability tests for mortgages by 50bps.

Via Capital Economics: Oil has been thrust back into the headlines over the past week following a spike in prices that has taken Brent crude back to around $75pb.

From the excellent Damien Boey at Creit Suisse: We have just published a note explaining our positive view of the slope of the yield curve.

The state of debate in this country is appalling.

Via BI: Citibank’s Australian economics and interest rate strategy team believe there’s a third option available to the RBA should the need arise: “helicopter money”, or printing money to be distributed to the public via the government.

From Chris Joye late yesterday: Industry participants believe the central bank and banking regulator are considering a targeted alternative to a cut to the official cash rate, which would involve lowering the minimum 7.25 per cent interest rate banks use when assessing a home loan borrower’s repayment capacity by 50 basis points to 6.75 per cent.

Via Bill Evans of Westpac: On February 21, Westpac Economics indicated that we believe that there is a case for two RBA rate cuts in 2019 – with the likely timing to be in August and November.

By Leith van Onselen Following last week’s crashing headline and underlying inflation over the March quarter: Roy Morgan has released its Inflation Expectations Index, which has plunged to levels not seen since late 2016: In March, Australians expected inflation of only 4% per year over the next two years.

Via Alan Kohler on the weekend: As if reducing retirees’ incomes again is going to make any difference.

Everybody is now forecasting imminent rate cuts: ANZ, NAB, WBC, MQG, CITI, CS, RBC, JPM, UBS, ME, TD, NOM, MB, bond and interest rate markets.

The Deflation Bank of Australia faces a conundrum, via The Australian: The RBA is facing up to the reality that a review of its economic forecasts on May 10 will include cuts to both its GDP growth and inflation forecasts, sharply eroding any optimism it might retain about the economic outlook.

Via Banking Day: While there have been plenty of lenders dropping fixed rates in recent months, few have cut their variable rates.

Via Westpac: • Westpac’s forecast for the March quarter CPI is 0.1%qtr with the annual pace easing back to 1.4%yr from 1.8%yr.

Via the excellent Damien Boey at Credit Suisse: We think that the RBA will cut rates, probably in 2H.

Via the excellent George Tharenou at UBS: Based on our proprietary survey, we cut our Q1 headline CPI forecast to 0.0% q/q (was 0.2%), a sharp slowing from Q4’s 0.5%.

Via Westpac: The RBA minutes clearly indicate that they are willing to cut the cash rate and have set out the conditions that need to be fulfilled for it to occur.

Dovish RBA minutes out just now: International Economic Conditions Members commenced their discussion by noting that the slower pace of global economic activity had continued in recent months.

CLSA’s excellent Brian Johnston is on the money here: Veteran CLSA bank analyst Brian Johnson said while funding costs had fallen, margins were still under pressure due to increased costs as investors coming to the end of their interest-only periods are forced to switch mortgage products to pay off both the principal and interest.