No Cash Rate Cut But November Is A Strong Possibility

No Cash Rate Cut But November Is A Strong Possibility

This morning we expected a cash rate cut from 0.25% to 0.10%, but it didn’t happen! It is easy in hindsight, why would the RBA cut when billions of dollars in stimulus was being announced by the government? We need to be drip-fed the good news to keep our spirits up and continue spending.

Still, I was in good company with well known economists Shane Oliver and Saul Eslake, also expecting the cut.

What is interesting is that the market has already factored in the cut and this can be seen in the ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve graph – one of my favourite references.

You can see the monthly forward rate expectations, well under half that of the pale blue dotted line showing the current 0.25% cash rate. Assuming the cash rate is cut next month, there’s little left on the horizon to get excited about.

While the RBA has just about come to the end of its interest rate cutting cycle, as it continues to state it will not entertain negative interest rates, it can still influence the market and one of the actions being suggested it that it buys government bonds in the 5-10 year maturity bucket to force rates on those bonds lower.

We will have to wait and see, there is a long way for this recession to play out and it is now time for fiscal policy (government spending) to take the reins and help the economy.

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Elizabeth Moran
Editor In Chief
Elizabeth is a nationally-recognised independent expert on fixed income. She has more than 25 years experience in banking and financial institutions in Australia and the UK and has been published in every major Australian newspaper and investment website. Prior to becoming an independent commentator in 2019 she spent more than 10 years as the head of education and research at fixed income broker FIIG Securities. Prior to joining FIIG, Elizabeth worked as an Editor/Analyst for Rapid Ratings a quantitative credit rating agency. She also spent five years in London, three working as a credit rating analyst for NatWest Markets.


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