Yield movements around RBA rates hikes

As we approach a likely 25 point rate hike next week I thought I'd provide some information on rate movements immediately before and after the RBA moves the cash rate. You'll note from the attached table (click here to view) that the move is generally priced in. In the November case there was a chance of a 50 point rise so some rates actually dropped after the rate rise. What you'll find in the longer end of the yield curve ( 5 to 10 years) is that the rate rises will reach a point where further rate hikes will cause these rates to drop. This is because the market is making an assumption that the rate rises will stunt growth and have a dampening effect on inflation. I suspect we will be getting close to this point when the cash rate reaches 4.50%. If China growth takes off, or inflation starts to spike in Australia due to rates staying low for too long, longer rates won't perform as described above however and the yield curve will steepen.