RBA Official Jacobs says the balance sheet is starting to unwind pandemic bond purchases, around AUD 20bln of purchased bonds have matured, pace will increase to circa. AUD 35-45bln/year.
- Conditions are now returning to normal: demand to borrow these shorter maturity bonds from the Bank has been falling recently as private investors have sold short-term bonds to extend their holdings out the curve.
- Expects the balance sheet unwinding to run smoothly.
- As the RBA's holdings of gov't bonds falls the private sector will need to absorb more issuance, a process which might place some upward pressure on yields but any effect is likely to be modest given market pricing should largelly reflect this, there is natural demand and Aussie gov't funding needs are relatively modest.
- Lower Exchange Settlement (ES) balances may see the traded cash rate increase a little within the corridor and cause a slight increase in money market rates relative to OIS rates.
- "We also have the tools to respond if any issues arise."
24 May 2023 - 08:10- Important- Source: RBA
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