ACGB Bid Fades But Outperforms U.S Tsys

ACGBs pulled back from firmest levels of Sydney trade, leaving YM -6.0 & XM -7.5 at the close, as the trans-Tasman bid from well-received NZGB supply and impulse from AU/US tightener flows faded alongside an extension of U.S. Tsy weakness in Asia-Pac hours. Cash ACGBs close near session cheaps, 6-7bp weaker with the curve 1bp steeper. AU/U.S. 10-year yield differential still manages to narrow -3bp to -17bp, after printing as tight as ~-20bp.

• Swaps cheapen 6-8bp with the 3s10s swap curve 1bp steeper.
• Bills were 2-7bp weaker on the day through the reds, steeper, but off session extremes.
• Terminal rate pricing on the OIS strip shows back above 4.20% after yesterday's CPI-inspired pullback resulted in a close below that level.
• With the local calendar light tomorrow, only home loan data for January is slated, the Aussie looks destined to seek guidance from abroad ahead of the RBA Policy Decision next Tuesday.
• Given the prevailing weakness in the global rates market, all eyes will turn to Eurozone CPI ahead of NY trading when we see if U.S. Tsy weakness in Asian trading is sustained, added to, or reversed.