Traders Diverging From Stevens Over Interest-Rate Rises: Australia Credit

Reserve Bank of Australia Governor Glenn Stevens has put the financial markets on notice that he’s likely to raise interest rates . Not this year, according to the bond markets.

Stevens will leave the cash-rate target at 4.75 percent tomorrow, matching his longest pause since taking charge in 2006, and is likely to keep borrowing costs unchanged for a year, money-market futures show. While economists also expect the RBA to hold interest rates this month, they forecast the benchmark will reach 5.25 percent by year-end, according to the median estimate of 27 analysts surveyed by Bloomberg News.

Stevens said June 15 rates probably have to climb “at some point” as “the underlying rate of inflation is more likely to rise than fall.” Bond investors are betting there’s no need to add to the developed world’s highest borrowing costs as Greece ’s struggles to avoid default roil financial markets and China’s growth slows. A gauge of inflation expectations shows Australia’s consumer prices will rise at a rate below the top of the RBA’s target range.

“Traders do not believe that the RBA’s confidence in the China commodity story will play out as strongly as the bank assumes it will,” said Sean Keane, an Auckland-based analyst at financial consultancy Triple T Consulting, and former head of Asia-Pacific rates trading at Credit Suisse Group AG. “The trading market still believes the RBA is overestimating the strength of the Australian economy, and that rate hikes will not be necessary.”

RBA’s Outlook

The central bank forecast growth in 2011 at 4.25 percent, in a May 6 policy statement, the fastest pace since 1999. Consumer prices will rise 3.25 percent over the period and core inflation will accelerate to 3 percent from 2.75 percent, it said. The RBA aims to keep inflation between 2 percent and 3 percent on average.

The spread between yields on five-year government notes and similar-maturity inflation-indexed securities narrowed 20 basis points since May 31 to 2.79 percentage points at the end of last month.

Commodity prices dropped in the three months ended June 30 for the first time in four quarters amid concerns China ’s attempts to slow inflation will curb demand for raw materials, a key driver of Australia’s biggest mining boom in more than a century.

A Chinese manufacturing index fell to the lowest level since February 2009, a July 1 report showed. The Thomson Reuters/Jefferies CRB Index fell 6 percent last quarter.

Day Trading Australia - News


Traders Diverging From Stevens Over Interest-Rate Rises: Australia Credit

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Australia Shares End Down 0.4% After Strong Year-End Rise

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Insider-Information Crackdown Vowed by Australia's Medcraft as Deals Leak

Chi-X Australia Pty, the Nomura Holdings Inc.-owned stock- exchange operator that is so far alone in winning regulatory approval to enter the Australian market, has said it may start its service as soon as October 31. That is the date that new trading




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Day trading the currency market, technical and fundamental strategies to profit from market swings

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In this book Kathy Lien gives a deep insight into all the mechanisms that take place in the currency markets.

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Securities Regulation in Cyberspace

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Australia Day Trading
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