Okay, this is more analysis than predictor. I've compared the size of the spread between what the two year bond yield and the cash rate target on the months that a rate change happened. Sorry for the formatting. The most important column is second from the right.
Date___Change in___New cash___Two Year___Difference from__Inverted yield curve?
_______cash rate___rate target___bond diff___old cash rate____yield curve?
3 Dec 2003 __ +0.25 __ 5.25 __ 5.71 __ 0.51 __ No
5 Nov 2003 __ +0.25 __ 5.00 __ 5.57 __ 0.82 __ No
5 June 2002 __ +0.25 __ 4.75 __ 5.82 __ 1.42 __ No
8 May 2002 __ +0.25 __ 4.50 __ 5.41 __ 1.16 __ No
5 Dec 2001 __ -0.25 __ 4.25 __ 4.55 __ 0.05 __ No
3 Oct 2001 __ -0.25 __ 4.50 __ 4.25 __ -0.5 __ No
5 Sep 2001 __ -0.25 __ 4.75 __ 5.03 __ 0.03 __ No
4 Apr 2001 __ -0.50 __ 5.00 __ 4.59 __ -0.91 __ No
7 Mar 2001 __ -0.25 __ 5.50 __ 4.63 __ -1.12 __ No
7 Feb 2001 __ -0.50 __ 5.75 __ 4.90 __ -1.35 __ No
2 Aug 2000 __ +0.25 __ 6.25 __ 6.28 __ 0.28 __ Yes
3 May 2000 __ +0.25 __ 6.00 __ 6.39 __ 0.64 __ No
5 Apr 2000 __ +0.25 __ 5.75 __ 6.24 __ 0.74 __ No(just)
2 Feb 2000 __ +0.50 __ 5.50 __ 6.75 __ 1.25 __ No
3 Nov 1999 __ +0.25 __ 5.00 __ 5.98 __ 1.23 __ No
Okay, for rate rises over the last five years and barring the rate rise just before the Olympics, the two year bond had to be higher by least 51-125 basis points than the current cash rate when the rate has gone up.
For falls in the cash rate, the two year bond has to be about level or up to gap between the two year bond and the current rate needed to be about level or up to 125 basis points lower than the current cash rate for a rate drop to happen.
If past behaviour is any indication of future behaviour, I don't think there's a rate rise in the works just quite yet. The two year bond over the last week has only been about 25 basis points higher than the cash rate.
Original data at http://www.rba.gov.au/Statistics/cashrate_target.html
and http://www.rba.gov.au/Statistics/OP10_update.xls
Jireh
Date___Change in___New cash___Two Year___Difference from__Inverted yield curve?
_______cash rate___rate target___bond diff___old cash rate____yield curve?
3 Dec 2003 __ +0.25 __ 5.25 __ 5.71 __ 0.51 __ No
5 Nov 2003 __ +0.25 __ 5.00 __ 5.57 __ 0.82 __ No
5 June 2002 __ +0.25 __ 4.75 __ 5.82 __ 1.42 __ No
8 May 2002 __ +0.25 __ 4.50 __ 5.41 __ 1.16 __ No
5 Dec 2001 __ -0.25 __ 4.25 __ 4.55 __ 0.05 __ No
3 Oct 2001 __ -0.25 __ 4.50 __ 4.25 __ -0.5 __ No
5 Sep 2001 __ -0.25 __ 4.75 __ 5.03 __ 0.03 __ No
4 Apr 2001 __ -0.50 __ 5.00 __ 4.59 __ -0.91 __ No
7 Mar 2001 __ -0.25 __ 5.50 __ 4.63 __ -1.12 __ No
7 Feb 2001 __ -0.50 __ 5.75 __ 4.90 __ -1.35 __ No
2 Aug 2000 __ +0.25 __ 6.25 __ 6.28 __ 0.28 __ Yes
3 May 2000 __ +0.25 __ 6.00 __ 6.39 __ 0.64 __ No
5 Apr 2000 __ +0.25 __ 5.75 __ 6.24 __ 0.74 __ No(just)
2 Feb 2000 __ +0.50 __ 5.50 __ 6.75 __ 1.25 __ No
3 Nov 1999 __ +0.25 __ 5.00 __ 5.98 __ 1.23 __ No
Okay, for rate rises over the last five years and barring the rate rise just before the Olympics, the two year bond had to be higher by least 51-125 basis points than the current cash rate when the rate has gone up.
For falls in the cash rate, the two year bond has to be about level or up to gap between the two year bond and the current rate needed to be about level or up to 125 basis points lower than the current cash rate for a rate drop to happen.
If past behaviour is any indication of future behaviour, I don't think there's a rate rise in the works just quite yet. The two year bond over the last week has only been about 25 basis points higher than the cash rate.
Original data at http://www.rba.gov.au/Statistics/cashrate_target.html
and http://www.rba.gov.au/Statistics/OP10_update.xls
Jireh
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