FAST FIVE: "Biggest Dovish Shock" From Australia Since 2008 "Supercharges" Bets That Global Tightening Is Ending
As Bloomberg also said, the Reserve Bank of Australia's dovish surprise would be interpreted by some as a “supercharged” sign that the end is in sight to the wave of aggressive monetary tightening that has steamrolled global bonds and equities this year.
“I think we are getting to the point where markets are pricing in peak rates,” said Ned Bell, chief investment officer at Bell Asset Management, a global equities fund manager based in Melbourne.
Two-year Treasury yields fell about eight basis points to 4.08% on Tuesday, adding to the 17 basis point decline on the prior day; it briefly dropped below 4% despite expectations for aggressive Fed hikes at least into Q1 2023.
The New Zealand central bank is expected to raise interest rates by 50 basis points for a fifth straight time, according to economists surveyed by Bloomberg. A hawkish surprise from the central bank at the forefront of global rate hikes could knock the wind out of bond bulls' sails; of course a dovish surprise would confirm that the pivot is now imminent.
“The RBA decision will stoke speculation that other central banks will begin slowing the pace of hikes,” Prashant Newnaha, strategist at TD Securities, wrote in a note.