Yield curve control from 3s to 10s

From today, the Reserve Bank of Australia is "targeting a risk-free interest rate further out along the yield curve" to complement the traditional focus on the overnight cash rate.

The RBA's "practice has been to target the cash rate, which forms the anchor point for the risk-free term structure. We are now extending and complementing this," Philip Lowe, the RBA governor explained in his dense speech yesterday.

"In particular, we are targeting the yield on three-year Australian government bonds and we have set this target at around 0.25 per cent, the same as the cash rate."

The RBA will buy Commonwealth and state securities, but no corporate or structured paper.

Lowe set out in his prepared remarks to draw a line between the specifics of the RBA's board's new interventionist aims and the poppy label of QE.

"Rather than quantities or the size of our balance sheet, our focus is very much on the price of money and credit," Lowe insisted.

"Our objective here is to provide support for low funding costs across the entire economy.

"By lowering this important benchmark interest rate, we will add to the downward pressure on borrowing costs for financial institutions, households and businesses.

"We are prepared to transact in whatever quantities are necessary to achieve this objective," he said.

The RBA said it is prepared to buy bonds "right across the maturity spectrum", thus up to and beyond 10 years.

So that's a cash rate target for three years any maybe more and a three-year bond rate the same.

Pricing and product competition in the mortgage market may centre on fixed rate deal.

InfoChoice this morning show the cheapest variable home loans and the cheapest fixed home loans are more or less even, around 2.45 per cent.