Summary:
What a difference a week makes. Over the course of the week Australia’s 10-year government bond yield declined to finish 4.34%, after two consecutive days of declines, as risk sentiment improved after some U.S. trade policy relief. The 2-year increased 4 bps to 3.34%. Quite the term premium. President Donald Trump is now looking into possible exemptions on existing auto tariffs, after temporarily exempting certain tech products from reciprocal tariffs.
On the monetary policy front, minutes from RBA’s April policy meeting highlighted uncertainty around the timing of the next interest rate adjustment. While the board noted that the May meeting would be an appropriate time to reassess policy, it emphasized that no decision had been predetermined. Still, markets remain fully priced for a 25bps rate cut in May, with some assigning around a 30% probability of a half point move. Investors now await the release of the March jobs report on Thursday to assess the health of the labour market and its potential influence on the RBA’s next policy steps.
One by one, economists are abandoning their interest rate forecasts for next month after US President Donald Trump upended financial markets with his “liberation day” tariffs. Earlier this month, a dozen were tipping the RBA would keep rates on hold in May. Today, just four are sticking with that view. Money markets are fully priced for a standard quarter of a point cut at the RBA’s next policy meeting on May 20 and are pricing in a 34% chance of a jumbo half-a-point move.
Exhibit 1: Implied RBA Cash Rate Expectations
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 5.20% | Min. monthly $1,000 dep. Limit $250,000. |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 4.10% | Make at least one deposit of $10 or more in a month, make no withdrawals (including transfers), or incur any fees, charges in the month. |
| Arab Bank Online Savings | 4.35% | On balances of $250,000 to $499,999 |
| Bankwest Hero Saver | 4.60% | On balances up to $250,000.99 with no withdrawals in that month |
| BOQ Fast Track Saver | 2.75% | $1000 minimum monthly deposit. On balances up to $250,000, over part the Base Rate of 0.05% p.a. applies |
| BoQ Bonus Interest Savings | 5.45% | Bonus interest is paid into your account when you limit your withdrawals to a maximum of one per month |
| CBA NetBank Saver | 2.35% | 2.40% p.a. fixed bonus margin for the first 5 months on your first NetBank Saver |
| CBA Goal Saver Account | 4.90% | At least 1 deposit required; balance at end of month must exceed balance at start of month. |
| Great Southern Bank | 4.30% | No bonus conditions |
| Heritage Online Saver | 3.45% | $1 or more, bonus intro rate 1.45% (promotional 4 month rate on new accounts up to $100,000) |
| ING Savings Accelerator | 4.70% | $150,000 and over |
| Macquarie CMA | 2.75% | Minimum $5,000 |
| ME Online Savings | 4.25% | Have both Online Savings Account and Everyday Transaction Account. On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 2.00% | Bonus rate 2.65% for the first four months when you open your first NAB iSaver account |
| NAB Reward Saver | 5.00% | make at least one deposit on or before the second last banking day of the month and no withdrawals during the month |
| Rabobank PremiumSaver | 5.35% | On balances to $250,000. Balance increased by $200 a month. |
| RAMS Saver Account | 1.40% | On balances to $500,000. Minimum $200 deposit each month with no withdrawals. |
| Suncorp Growth Saver | 5.05% | Minimum $200 deposit each month and no more than 1 withdrawal |
| ubank Save Account | 5.00% | 5.5% on first $100,000, 5.0% on next $150,000; applies only on amounts upto $250,000. Minimum $500 deposit each month into Spend or Save accounts. |
| Up Savers Account | 4.35% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Westpac eSaver | 1.10% | 4.25% p.a. for the first 5 months for new Westpac eSaver customers |
| Westpac Reward Saver | 5.00% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. Keep your account balance above $0 at all times. |