How many RBA hikes can you handle?

Callum Thomas

Topdown Charts

With the consensus slowly but surely shifting to expect rate hikes from the RBA, it's worth thinking about the impact of RBA hiking cycles on asset markets.  One asset class we recently looked at is Australian credit spreads - we took a look at a few different drivers, and the RBA cash rate is an important one.  While the sample size is small, the pattern is that a series of rate hikes will ultimately lead to a widening of credit spreads (bad for corporate bonds).

https://www.livewiremarkets.com/rails/active_storage/blobs/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBbU5RIiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--3867a940cf7d868f965441954bf019048d8acc26/RBA_rate_hikes.PNG

While not many people are picking an overly aggressive hiking cycle by the RBA, and most say sometime next year for the first hike, there has been a series of out of cycle hikes in mortgage rates, and debt loads remain high.  Thus it's entirely possible that credit spreads may widen earlier in the rate hiking cycle this time around.  So while interest rates are just one of the many factors you need to think about for credit spreads, it is one to keep in mind.


Callum Thomas
Head of Research
Topdown Charts

Callum is Head of Research at Topdown Charts. Topdown Charts is a chart-driven macro research house covering global Asset Allocation and Economics.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.