Why wouldn’t the cash rate be zero or negative in Australia?
Banks are not lending to business, not meaningfully and they are throwing everything at a household-led economic recovery from the 2020 Covid shock.
It is wishful thinking to foresee 2021 as a year to look forward to. The GameSpot nonsense can only portend a reckoning via the equity market and with CCC credits pricing way too tightly, a credit shock worth having is, as ever, near.
The primary market for Australian Treasury Notes has been pricing negative for weeks.
“Once again, the T-Note tender found negative bids,” wrote Peter Sheahan from Curve Securities in his weekly money market comment on Friday.
The T-Note issuance for the final week of January was A$1.5b across two lines of $750m. Bids on the 21/5/2021 maturity were stronger as the weighted average fell from 0.0102 per cent to 0.0048 per cent.
The range was -0.0050 per cent – 0.010 per cent which, Sheahan said, “was essentially lower and tighter”.
“The first issue of the 27/8/2021 was also lower and tighter than last week at 0.00 per cent - 0.02 per cent with a weighted average of 0.0126 per cent down from 0.0172 per cent.
“The margin to BBSW is now negative on both tenors. $9.5b of bids were received representing coverage ratios of 7.1 times and 5.4 times respectively. The 29/1/2021 maturity $10b will be repaid today and the gross outstandings are now $39.75b.”
Funding via RBA Reverse Repo pricing continues to deal at 0.10 per cent.
“A low 58 per cent per cent of maturities were rolled and outstandings are lower at $16.5b down $683m,” Sheahan said.
“The longest tenor was a shorter 70 days. I can see this book regressing to less than $10 billion by March/April as ES balances rise and offer a price advantage lower than 0.10 per cent.
RBA unsecured overnight cash continued to price at 0.03 per cent, “and this seems to be the new established setting” said Curve’s maven.