SINGAPORE: The Reserve Bank of Australia said on Friday it had stepped in to defend its yield target for the first time in eight months, spending A$1 billion ($750 million) to dampen an aggressive bonds sell-off as traders have bet on inflation pulling forward rate hikes.
The bank bought its targeted April 2024 bond at a weighted average yield of 0.12%, Yieldbroker data showed , a little above its 0.1% target but well below the heights of 0.218% that were scaled earlier in the week.
The purchases leave the RBA holding about 63% of the April 2024 issuance.
Australian rates markets have sold off heavily in the wake of a red-hot inflation reading in New Zealand this week, as traders reckoned it would be echoed across the Tasman and push the RBA to raise rates well before it expects to move.
The RBA has repeatedly said it does not expect to hike before 2024, but swaps markets have priced in more than 100 basis points of hikes before the end of 2023. RBA governor Philip Lowe said on Friday that the bank was closely watching a spike in inflation but that he did not think the rise would be sustained unless it led to wages growth.
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