The Australian economy is picking up under reopening, and a falling saving rate

Likelihood of closed borders through most of 2021 limits the output gap damage to an extent, such that inflation doesn’t fall entirely off the map

This means there is life in the cyclical outlook yet, and the RBA’s QE program and new guidance framework have something to ‘push against’

Further, the leadership is averse to negative rates, and to Yield Curve Control (YCC) tenor extension, so incremental easing will continue to be deployed via explicit liquidity injection (i.e. quantity targets)

RBA QE absorbs almost all AOFM net issuance for the remainder of the fiscal year, and other things equal, would leave banks at the shortest levels since 2016 Keep a strategic bias to OW ACGB 10Y bonds vs UST 10Y notes, and vs the NZGB 10Y sector, particularly in a rising global yield backdrop We also expect a steeper swap spread curve into 2021; position for a steeper 3s/10s EFP box, a flatter 2s/5s ACGB curve, and cheaper belly in 2s/5s/10s swap fly We expect much stronger transmission from incremental RBA asset purchases and Term Funding Facility (TFF) use into Exchange Settlement Accounts (ESAs), now that fiscal withdrawal has ceased  Surplus ESAs should swell to over A$200bn by June, and the RBA’s balance sheet should increase from 15% of GDP to 24%