RBA Yield Curve Steepens Marginally At 3rd Auction, More of 2028 Bonds?

By Sophia Rodrigues

The Reserve Bank of Australia bought the entire A$4 billion of notified amount it announced for the government bond-buying auction Tuesday but instead of flattening the curve further, it steepened marginally.

This is despite the RBA refraining from purchasing one of the four bonds it proposed to buy Tuesday. It likely did so to divert more money into buying the 2026 and 2028 bonds.

In an aim of flatten the curve, the RBA ended up buying A$1.774 billion of November 2028 bonds. This was nearly half of the notified amount and yet the cut-off yield rose to 0.8225% compared with 0.7925% at Monday's auction. The weighted average yield was 0.8285%.

The RBA also bought A$1.596 billion of April 2026 bonds at a cut-off yield of 0.5350%. This was in line with the cut-off yield of 0.5550% for the April 2027 bond on Monday.

The RBA didn't buy any July 2022 bonds, and it bought A$630 million of December 2021 bonds at a cut-off yield of 0.2749%.

The auction results suggest the RBA will conduct more buying this week, particularly of 2028 bonds and possibly extend of 10-year bonds.

--Contact: sophia@centralbankintel.com