RBA steps up bond purchases
All eyes are on the bond market this week, and the central bankers who manipulate it.
US 10-year yields are up 4.4 bps to 1.45% to start the week in a somewhat worrisome sign. The broader market is taking it in stride but that has a limit.
The RBA clearly reached its own limit and bought an additional A$4B in bonds, more than doubling the daily pace. That sent AUD 10-years down 24 bps to 1.67%. But even there, the effect is fading as yields are 7 bps above the lows.
Global central banks are likely to view this as a US problem. It's the US who is vaccinating first and delivering enormous fiscal stimulus and they undoubtedly see the Treasury market dragging their bond markets around.
So a schism is developing where they're forced to amp up QE in the absence of the Fed. If the Fed does nothing and says nothing this week to counteract that, then the market is going to run with it and that will mean USD strength.
The intrigue starts at the top of the hour with the Fed's Williams to speak (1400 GMT). That's followed 5 minutes later by Brainard.
On the economic calendar we get the ISM Feb manufacturing survey at 1500 GMT. THe consensus is 58.6 from 58.7.
