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ABC News: Interest rates may rise sooner than expected
1 November 2021
Traders have forced the Reserve Bank into submission, with the RBA declining to enter the market to buy April 2024 federal government bonds to defend its interest rate target.
The Reserve Bank has maintained a 0.1 per cent yield target on the three-year Commonwealth debt that matures in April 2024, but market traders have recently repeatedly pushed the return on those bonds substantially above that benchmark.
After rising steadily over the past week, the yield on those bonds was sitting around 0.25 per cent, before more than doubling yesterday to sit above 0.5 per cent, or more than five times the Reserve Bank’s target level.
- The RBA did not buy April 2024 Australian government bonds on Friday, allowing the yield on them to stay above 0.5 per cent
- It had been targeting a 0.1 per cent yield on those bonds to keep longer-term interest rates low
- This is likely to push fixed mortgage rates even higher and means the first cash rate increase may come as early as next year
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