Australian Bond Exchange

ABX Weekly 19/02/2020Market Update  

Australia’s profit reporting season is in full swing with a daily barrage of company news hitting the news wire. Australia’s biggest bank CBA for once surprised the market on the positive side which was a very refreshing change from the past couple of years when scandals and massive fines were overshadowing the result. The bank’s result is clearly a benchmark for its peers with the key mortgage market growing by 4% and the overall net interest margin (NIM) increasing slightly to 2.1%. 

In some other news, our RBA Governor Philip Lowe has highlighted recently that monetary policy may be at or near a cross point. In the recently released minutes, the board states that it recognises that the incremental benefits of further interest rate reductions need to be weighed against the risks associated with very low-interest rates. A further reduction could also encourage additional borrowing at a time when there was already a strong upswing in the housing market. 

In market news, our 10y government bond was drifting lower slightly from 1.12% down to currently 1.03% and the all-important 90BBSW stands currently at 0.9066%. 

In some overseas news, we have seen markets move into a risk “on” positioning thanks to optimism over additional monetary and fiscal easing in China. Over the weekend, China moved proactively to a weakening outlook in the wake of the coronavirus outbreak. While Coronavirus concerns have faded, the economic chaos will be felt for quarters to come. Ahead of Thursday’s PBoC rate decision, the central bank cut a crucial interest rate that could pave the way for lower benchmark lending rates, as Beijing moved to support an economy. The People’s Bank of China lowered the one-year medium-term lending facility rate to 3.15% from 3.25%, according to a statement published.