14 Mar 2014
Flash: Market may start to look at the risk of a tighter RBA - Nomura
FXStreet (Bali) - According to Charles St-Arnaud, Australia Economist, and Martin Whetton, Australia/New Zealand Rates Strategist, both working for Nomura, after the strong jobs report in Australia, the market will start to look at the risk of the RBA moving to a tightening bias.
Key Quotes
"The Australian economy gained 47.3k jobs (Consensus: 15.0k) in February after gaining 18.0k in January (revised up from -3.7k). Despite the strong increase in employment, the unemployment rate remained unchanged at 6.0%, as the participation rate increased to 64.8% from 64.6%. Most of the increase was again in full-time jobs (80.5k), the largest increase since 1991, while there were fewer part-time jobs (-33.3k). The total number of
hours worked fell in the month (-0.9% m-o-m), despite the increase in employment – a sign of decreased labour productivity. By state, on a seasonally adjusted basis, most of the gains were in New South Wales and Queensland."
"Although somewhat sceptical of the large change, the report is positive. It suggests that job creation seems to have recovered, having stalled for most of 2013. However, given the volatility of the labour statistics, we are not yet convinced that the trend has turned. More specifically, the Australian Bureau of Statistics (ABS) updated its seasonal adjustment methodology and judging from preliminary information contained in the release, this may have boosted job gains relative to the old methodology. Nevertheless,
today‟s report should provide some relief that the labour market may be stabilising. We continue to expect the first rate hike in H1 2015."
"The blockbuster jobs data has changed the narrative for markets, albeit one that will look at this data print with a healthy degree of scepticism. The OIS curve saw a significant sell-off in rates, with a 5-10bp move higher in rates over the 6-12 month RBA dates. This brings the first pricing of a rate hike to 2.501% at the September meeting and aligns with our view of being paid in the OIS market. While we were recently stopped out of a paid OIS position in the October RBA date, we continue to hold our Sep OIS 3m at 2.485%. We also maintain our view of a flatter curve and think that the market will start to look at the risk of the RBA moving to a tightening bias. 10yr bond yields hit a monthly high of 4.25%."
Key Quotes
"The Australian economy gained 47.3k jobs (Consensus: 15.0k) in February after gaining 18.0k in January (revised up from -3.7k). Despite the strong increase in employment, the unemployment rate remained unchanged at 6.0%, as the participation rate increased to 64.8% from 64.6%. Most of the increase was again in full-time jobs (80.5k), the largest increase since 1991, while there were fewer part-time jobs (-33.3k). The total number of
hours worked fell in the month (-0.9% m-o-m), despite the increase in employment – a sign of decreased labour productivity. By state, on a seasonally adjusted basis, most of the gains were in New South Wales and Queensland."
"Although somewhat sceptical of the large change, the report is positive. It suggests that job creation seems to have recovered, having stalled for most of 2013. However, given the volatility of the labour statistics, we are not yet convinced that the trend has turned. More specifically, the Australian Bureau of Statistics (ABS) updated its seasonal adjustment methodology and judging from preliminary information contained in the release, this may have boosted job gains relative to the old methodology. Nevertheless,
today‟s report should provide some relief that the labour market may be stabilising. We continue to expect the first rate hike in H1 2015."
"The blockbuster jobs data has changed the narrative for markets, albeit one that will look at this data print with a healthy degree of scepticism. The OIS curve saw a significant sell-off in rates, with a 5-10bp move higher in rates over the 6-12 month RBA dates. This brings the first pricing of a rate hike to 2.501% at the September meeting and aligns with our view of being paid in the OIS market. While we were recently stopped out of a paid OIS position in the October RBA date, we continue to hold our Sep OIS 3m at 2.485%. We also maintain our view of a flatter curve and think that the market will start to look at the risk of the RBA moving to a tightening bias. 10yr bond yields hit a monthly high of 4.25%."