Any Interest?

The Domestic Bank dealers Bill (DBB)swap rate on the 27th of February was:
90 day – 3.16%
180 day – 3.09%

The domestic bond rates:
5 year – 3.8%
10 year - 4.4%

The Bank Bill (BB) swap rate:
30 day – 3.22%
60 day – 3.25%
90 day – 3.21%
120 day – 3.18%
150 day – 3.16%
180 day – 3.14%

Bank Bills
1 year - 2.865%
3 years – 3.655%
5 years – 4.2%


The 30 day BB rate is 3.22% which is lower than the 60 day BB at 3.25%. This could indicate the market expects the Official Cash Rate (OCR) to fall.

On the 20th February 2009 the Reserve Bank of Australia’s Governor Glenn Stevens said in a statement to the Standing committee on Economics:
“The deterioration in international economic conditions was so rapid that no policy response could prevent a period of near-term weakness in the Australian economy. We are being affected by the global downturn, and cannot realistically expect other than weak conditions in the first part of 2009. But the very large reduction in interest rates, the lower exchange rate and the major fiscal initiatives will work to support demand, increasingly so as the year goes on. Inflation is likely to continue its moderation that began in the December quarter, and to do so faster than expected six months ago.”

“Compared with the sorts of growth we enjoyed until fairly recently, this is a weak near-term outlook. But if the outcomes we see turn out to be even close to these, Australia will have done well in comparison with most other countries. We have claimed all along that Australia was better positioned than many countries to ride out the international difficulties. Credit standards do seem to have tightened further over recent months and banks are seeing the inevitable increase in bad debts as the economy slows.”

“So there are reasonable grounds at this stage to think that the Australian economy will come through this very difficult episode – certainly not unscathed, but well placed to benefit from a renewed expansion. Things will be difficult over the next year.”

With these words from the RBA Governor and the 180 day DBB rate at 3.09%; lower than the OCR. The Australian Federal Reserve Bank will not lower the OCR as it is higher than the OCR at 3.25%.