Marion Kohler, Head of Domestic Markets at the Reserve Bank of Australia (RBA) said in the text of a speech Tuesday, the central bank will closely look at the risk premiums to detect whether asset prices are rightly valued, in times of record-low interest rates, per Bloomberg.

Key quotes

“Asset prices increase when risk-free rates are low, and this is part of the monetary transmission mechanism.” 

“While bank bond spreads are around their lowest level in over a decade, it’s difficult to know whether this is not aligned with fundamentals.” 

“Another area of focus for the RBA is the potential refinancing of its cheap funding facility for banks, which will mature around September 2023 and June 2024.”

“Banks can meet this task in a number of ways, including via deposits and bond issuances. “

Market reaction

AUD/USD was last seen trading at 0.7230, up 0.12% on the day.

• AUD/USD consolidates losses above 0.7200 on RBA’s Kohler, sluggish yields