RBA to cut another 1%?

[unloadmymind]

We've never had someone give us a "reality check" before. It's so refreshing to have a quiet voice of reason amongst these land-lubbin' specufestors.

It must be the same person - welcome back, nonrecourse. I've missed our banter.

?Que?

No I'm just a teenager who wants to scream.

Anyway. Any mortgage broker spruiking fixed rate loan because "rates will never get lower than this" or "rates will have no other way but up" should be prosecuted for providing incorrect advice. Many of them don't even understand basic economics and yet they proclaim interest rate expertise when spruiking fixed rate products. #RantOver #ThankJesusIDidNotFix

 

[unloadmymind]

It almost seems a bit like a self fulfilling prophecy, all the doom and gloom talk.

Maybe they should just tell everyone the economy is awesome so they are raising interest rates and then everyone will be confident enough to spend again.

Maybe we need a recession. To clear the deck, to bring out the Darwinian forces among us.

This is a country of complacency underwritten by once-off minerals fortune without the first world industrial innovation that sets other developed countries apart.

The sooner we get back to our senses, the stronger we grow out of it.

 

[charttv]

Iron ore isn't the only thing we do here.
There's plenty of other industries that've been biding their time waiting for the mining boom to finish.

I export higher education...we are booming thanks to the decline in the AUD.

 

[WattleIdo]

Love it! I'm usually part of that package too. Means I can consider returning to the coast again. Not forever stuck out here in regional land.

 

[hobo-jo]

Iron ore isn't the only thing we do here.
There's plenty of other industries that've been biding their time waiting for the mining boom to finish.
Come spring time, no more doom & gloom.

Exactly!

We have a diverse car manufacturing base. Their bottom lines will be improved by a falling AUD making longevity and expansion inevitable here... right?

 

[sanj]

Exactly!

We have a diverse car manufacturing base. Their bottom lines will be improved by a falling AUD making longevity and expansion inevitable here... right?

Haha oops...

 

[Ausprop]

Maybe we need a recession. To clear the deck, to bring out the Darwinian forces among us.

This is a country of complacency underwritten by once-off minerals fortune without the first world industrial innovation that sets other developed countries apart.

The sooner we get back to our senses, the stronger we grow out of it.

this is true but it needs to be more severe... severe enough to fracture federation and completely reorganise the country

 

[euro73]

The More RBA cuts, the APRA will Curb on lending...

If APRA mandates a 7% assessment rate floor for all banks , a rate to borrower of 2% or 4% is irrelevant to borrowing capacity. Only pay rises and rental increases or aggressive debt reduction will improve capacity, no matter what the rate to borrower falls to, as all debt will be assessed at a minimum of 7% anyway.

What lower rates SHOULD result in under these new APRA imposed changes however, is accelerated de-leveraging, thanks to the opportunity lower minimum monthly repayments create to make accelerated repayments.

That in turn reduces some of the systemic risks APRA is clearly concerned by. APRA will be VERY VERY happy with that outcome, I would imagine. As will the RBA, who will feel more comfortable about reducing the cash rate ( should they feel the need) without concerns about speculative investment "froth" As should the Government, who get to kick the still necessary, still inevitable structural reform to neg gearing , CGT and SMSF gearing , down the road another 2-3 election cycles, as the regulators do the heavy lifting they don't have the courage to do.

Did someone say lifters? leaners?

 

[unloadmymind]

this is true but it needs to be more severe... severe enough to fracture federation and completely reorganise the country

The mining states will lead us to recession. But Sydneysiders like me can still whistle down this Recession thing.

 

[unloadmymind]

Perhaps you need to improve your sources ?

LoL

I am well aware of this graph.

Today's market is pricing in another rate cut. Quite different from yesterday's graph.

http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf

Let's see how it evolves as the latest GDP data set is released on Wednesday anf after the RBA meeting on Tuesday.

 

[Deltaberry]

Yea well that may all be true. I guess the only thing that matters is how do we all benefit from all these predictions, and how do we benefit still if these predictions were wrong?

 

[unloadmymind]

Yea well that may all be true. I guess the only thing that matters is how do we all benefit from all these predictions, and how do we benefit still if these predictions were wrong?

For a basic start, don't fix your rates yet contrary to what some brokers are saying.

 

[hobo-jo]

The multi trillion dollar bond market begs to differ with your sources. This was the yield curve yesterday morning.....

http://somersoft.com/forums/attachment.php?attachmentid=14580&stc=1&d=1432849762

.....and yesterday arvo was only slightly changed. However, there is ~80% possibility of a 0.25% cut by this time next year.

http://somersoft.com/forums/attachment.php?attachmentid=14581&stc=1&d=1432849762

Perhaps you need to improve your sources ?

So what did the yield curve show in 2012 when rates were over 1% higher? Did the "multi trillion dollar bond market" predict the 1%+ drop we've seen since then? Hmmm nope: http://web.archive.org/web/20121025...om.au/data/trt/ib_expectation_curve_graph.pdf

 

[keithj]

So what did the yield curve show in 2012 when rates were over 1% higher? Did the "multi trillion dollar bond market" predict the 1%+ drop we've seen since then? Hmmm nope:

Do you think the facts changed between your yield curve & rates dropping ? When the facts change the market (quite rightly) changes its mind - what do you do ? It changed its mind yesterday when CAPEX came in 2% short of what was forecast. Do you honestly believe the markets know with 100% certainty everything that will happen in the future ? Of course not - they base it on known facts & probabilities of future events.

What the OP is forecasting with 100% certainty is a 1.0% rate cut based on the shortfall in CAPEX. The market has priced it as a 100% chance of a 0.25% cut in 10 months - the day prior the market priced it only 80% chance. He stands to make millions if he truly believes that.

 

[keithj]

I am well aware of this graph.

Excellent - reputable sources are critical - perhaps it could have been mentioned in your 1st post ?

Today's market is pricing in another rate cut. Quite different from yesterday's graph.

Hmmmm, not really. Here's todays & yesterdays - they are almost identical.

 

[MIW]

As long as the banks pass it all on!
I'm with the CBA and last month when the RBA cut the interest rate by 0.25% the CBA only cut my interest rate by 0.2%. With all this media hype about investors it wouldn't surprise me if the banks get greedy and decide not to pass on the full rate to investors.

It wasn't just CBA, other lenders followed similar paths???

 

[unloadmymind]

Hmmmm, not really. Here's todays & yesterdays - they are almost identical.

So the market is now accepting and fully pricing in another rate cut?

yesterday did not...

Excellent - reputable sources are critical - perhaps it could have been mentioned in your 1st post ?

how about someone called Mr Common Sense?

Capex Cliff means nothing else other than a Capex Cliff...except it's steeper and deeper than expected.

Hockey's budget stimulus of $250m for his tradies and baristas is nothing compared to the billions of lost investment. he should be praying the Rosary right now.

No amount of consumer spending or residential construction can fill the Capex Black Hole left by mining.

 

[keithj]

So the market is now accepting and fully pricing in another rate cut?

Exactly - yesterday was ~80% chance. Today the market expects a ~100% chance of a single cut to 1.75% at some time in the next 12 months.

So based on the currently available information, do you stand by your call of a 1.0% cash rate ? or can we agree that it's garbage ?

 

[C-mac]

You really think people are pricing in another cut into asking prices for resi property? Or do you mean lenders pricing in another cut into their rate floor calcs for applicants?

 

[hobo-jo]

What the OP is forecasting with 100% certainty is a 1.0% rate cut based on the shortfall in CAPEX.

Why is there a question mark in the topic if it was stated with 100% certainty?

All I see is someone sharing their opinion as the "multi trillion dollar bond market" has done in the past and been wrong on many occasions, especially on the long end of the curve.