David Jacobs, head of domestic markets at the Reserve Bank of Australia (RBA), said on Wednesday, he expects the balance sheet unwinding process to run smoothly, though are attentive to the challenges involved.

Additional quotes

“Its balance sheet starting to unwind pandemic bond purchases; around $20 billion of purchased bonds have matured.”

“Pace of these maturities will increase to around A$35–45 bln per year.”

“Around A$4bln of TFF funding has been repaid so far; large maturities are due ahead of September this year and June next year.”

“As its bond holdings fall, process of private sector absorbing more issuance might place some modest upward pressure on yields.”

“Decline in es balances will be particularly rapid as TFF rolls off; has potential to cause some strains.“

“ES balances will remain well above pre-pandemic levels for some time, so will be ample for the banking system’s payment needs.”

Market reaction

AUD/USD is testing daily lows near 0.6570 on the above comments, losing 0.53% on the day. The Aussie bears the brunt of a dovish RBNZ policy announcement and a cautious market mood.