ACGB Yields Rebound As RBA Stays On Sidelines

It was a rollercoaster start to the session for ACGB space, as participants placed bets on whether the RBA will repeat last Fridays unscheduled debt purchase offer to defend its 0.1% yield target on ACGB Apr '24. They refrained from stepping in over the last two days, even as short-term yields surged after Wednesday's CPI report. The Reserve Bank remained on the sidelines today, which resulted in the rapid unwinding of early morning moves.

• ACGB yields bounced back after it became clear that the RBA won't be enforcing their yield target today. The initial sizeable dips in short-term yields were driven by expectations that they would step in to buy ACGB Apr '24. Meanwhile, reaction moves may have been amplified by the proximity of the RBA's next monetary policy decision, due Tuesday. ANZ noted that they now expect the RBA to ditch their Apr '24 yield target next week. ACGB yields last sit 0.7-8.0bp higher, the curve is generally steeper but 2s (ACGB Apr '24) underperform. YM was knocked on its head and last sits +1.0, XM trades -7.5. Bills trade 1-6 ticks higher through the reds. RBA inaction overshadowed local data releases (retail sales beat) and the auction of A$1.0bn of ACGB Nov '32. The AOFM released their weekly issuance schedule.
• JGB futures went offered and last trade at 151.32, 7 ticks below last settlement, likely pressured by spillover from ACGBs. Cash JGB yield curve runs a tad flatter, as the super-long end outperforms. Japan's data releases were generally underwhelming, as flash industrial output and Tokyo CPI both missed median estimates. Focus moves to Japan's upcoming general election, with some uncertainty around the performance of the ruling LDP evident.
• T-Notes rebounded from earlier session lows, last trade +0-03 at 130-27. Cash Tsy curve has bull flattened, yields last sit 1.6-2.4bp lower. Eurodollars last seen -0.5 to +3.5 ticks through the reds.