AU 3 Year Yields squashed by aggressive RBAThe RBA has a stated yield control curve target of keeping the 3 Year Yield at .10% - the same as its overnight cash rate. However, the market was moving in a direction to push this higher in anticipation of rates being lifted faster than the RBA had previously stated.
Last week the RBA decided to punish those short investors in the three yield by stopping the Commonwealth treasury lending out three-year government bonds, which partially denied short sellers access to these assets to dump on market.This meant the main lender of three-year bonds was the RBA itself - as its single largest owner through its QE program. The RBA then massively increased the cost of borrowing these bonds, making it prohibitively expensive to short-sell them.
As a result, the yield has dropped below 0.10, thanks to the reduction in short selling by investors.
The RBA has said to the market that it will continue its QE program and will expand this even further if required. It's new target is reduce unemployment to below 4% and rates will be held until this goal is achieved.
While the RBA is moderately concerned about 10 Year rates, the 10Y rates, recently dampened by the RBA's last announcement QE program, are continuing to grow.
Au0319
ridethepig | Aus 10yr Holding SupportA noteworthy breakout in Aus 10yr with the technical damage already done as bulls remain supportive at the lows. The 38.2% from the impulsive leg, although still yet to be tested will cap any further downside in the coming weeks.
Here we are dealing with the capture of the pinned retrace. We have heaped up the size of our attack, but have to face up to the disappointment that said 38.2% cheerfully remains open and unlocked for a further test. The rascal was not locked yet, at the most only 'partially' ...however the issue of how to execute the impulsive nature in the attack is easily solved with the technical break.
The risk to reasoning here comes from the final diagram:
AUD is becoming supported by the improvements in capex intentions which is picking up faster than expected. Government infrastructure is too important and remains high before expiry in 2021. As long as the consumer re-leverages and we activity in the corp sector improves AUD will present the correct procedure for bulls and with the intention of avoiding a loss in momentum, we must track the breakout in this case the AU 10yr.
We can update the thread over the coming Weeks, Months and Quarters so feel free to jump in with your idea generation and we can further the discussion for all.
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