In an amusing twist, Deutsche Bank's Jim Reid began his latest Daily Reid note by offering "all due respect to his readers in Australia", because "I’m going to open the market section this morning with a line I don’t think I’ve written in 27 years of market commentary and probably won’t again. And it’s not about England thrashing Australia at cricket on Saturday. Yes the most important event of the week could be the RBA meeting tomorrow."
Even ahead of the meeting, there has been some unprecedented fireworks (which we discussed previously), as 2 year yields last week rose from 0.15% on Wednesday morning to 0.775% at the close on Friday as the RBA were conspicuous by their absence in defending the 0.1% target on the April 24 bond.
That said, Reid has "absolutely zero idea what they are going to do tomorrow which should help you all tremendously but their absence again this morning gives a decent indication. I was taught economics in an era where central banks liked to keep an element of mystery and surprise. As such I’ve always disliked the forward guidance era as it encourages markets to pile on to much riskier, one way positions that a normally functioning market should naturally allow. But to go from forward guidance to silence (that rhymes) is a recipe for huge market turmoil if the facts change."
That said, Reid echoes what we wrote over the weekend in ""10 To 20 Asset Managers Are Being Liquidated" - Rate Vol Exploding Just As Funds Pile Into Repo Trade That Blew Up Market" and admits that "It's unclear if the full implications of last week’s carnage at the global front end has yet been cleared out. There is lots of speculation about large unwinds, big stop losses etc. Liquidity was also awful last week. Much might depend on central banks this week. Make no mistake though there is considerable pain out there."
The latest this morning in Aussie rates is that the 2y yield is down around -7bps while the 10y yield is down -19.0bps.